Deals Of The Week: UCSF Catalyzes R&D Tech-Transfer Deals With Private Sector

Neither MedImmune, the biologics arm of AstraZeneca, nor the University of California, San Francisco, is a stranger to R&D collaboration between private industry and academia, but the agreement they signed on Feb. 11 is somewhat unique in that it will take advantage of a UCSF program that was intended to provide external expertise that might help to move basic research into more advanced stages.

At UCSF’s Clinical and Translational Science Institute, the Catalyst Awards program benefits from the input of industry and academic advisors who review burgeoning science and help select which projects should advance further and be given increased resources. CTSI oversees UCSF researchers working on therapeutics, devices, diagnostics and digital health applications, explained June Lee, director of early translational research at CTSI.

The Catalyst program started with about 120 advisors, and now has about 140 and is growing in numbers. “These folks are from all different disciplines, mostly from industry, and represent various different sectors and areas of expertise for product development in the life sciences,” Lee said. According to her, it’s more of a happy coincidence than a plan that the Catalyst Awards program spurred a broad-based partnership – considering both small- and large-molecule projects in cardiovascular and metabolic disease, oncology, respiratory, inflammation and autoimmune disorders, neuroscience and infectious disease – with MedImmune.

The collaboration could end up bringing early-stage assets to MedImmune (or AstraZeneca) in any of those areas, Lee added, since UCSF has 2,400 faculty, of whom about 1,300 are doing research primarily. “Our people are working in all areas of research, and that’s not accounting for post-docs or graduate students,” she said.

“Our primary goal was to enable and support of early-stage technology projects at UCSF,” she said. “For things that have product potential, we bring in the necessary expertise to help the faculty move projects along. Even though spurring deal-making may not have been our primary purpose, the program really is a very appropriate portal for people on the outside to look through to determine which university technologies are most ready to be licensed out.”

Terms have not been disclosed for the MedImmune/UCSF tie-up but Senior VP and Head of the Respiratory, Inflammation and Autoimmune Innovative Medicines Unit (iMED) Bing Yao said that unlike the Johns Hopkins and University of Maryland, Baltimore arrangements signed last year, which feature an overall R&D funding allocation, funding for this partnership will be determined on a case-by-case basis.

“Some of the programs, we will want to bring to the next stage – they could be preclinical or [we could want to move them] further into clinical development,” Yao noted. “This way, we can give a lot of input. As a company developing products for multiple therapeutic areas, we can bring our expertise to facilitate [the projects] but each program will be unique.”

The agreement extends for three years, with an option to extend it. MedImmune and AstraZeneca personnel will join with the Catalyst Awards advisors and UCSF staff to determine which products move forward with MedImmune/AstraZeneca backing. And the company will have exclusive options rights to the programs it backs, Yao said.

In the six months, Gaithersburg, Md.-based MedImmune has shored up its local base by signing a five-year, $6.5 million, broad-based R&D partnership with Johns Hopkins University in December and a five-year, $6 million pact with University of Maryland, Baltimore in September. It also has R&D relationships with academia in the U.K. and, now, with the UCSF partnership, gets better access to technological advances stemming from the biotechnology hub in the San Francisco bay area, Yao told Deals of the Week.

UCSF, meanwhile, is one of five founding members of the Academic Drug Discovery Consortium, founded in 2012 to serve as a clearinghouse for both academia and industry on research underway within U.S. and international drug research programs. Since 2010, UCSF has negotiated research collaborations with Genentech, Pfizer, Sanofi and Bayer, while licensing a preclinical antibody for organ failure to Stromedix and genetic encoding intellectual property for Parkinson’s disease to uniQure.

While that agreement was signed, other M&A and licensing activity was heating up the cold and snowy winter. Read on for the rest of ....

Mallinckrodt/Cadence: Mallinckrodt will have a lot of work to do to make good on the $1.3 billion it’s paying for Cadence Pharmaceuticals, a price more than 10 times the projected 2013 sales for Cadence’s sole product, Ofirmev (intravenous acetaminophen). Mallinckrodt says the acquisition gives it a third therapeutics platform, in the hospital setting, in addition to its existing focus on generic drugs and pain medications. The specialty drug company plans to keep Cadence’s sales and marketing capabilities and acquire additional hospital products to sell through them. Mallinckrodt announced the acquisition Feb. 11, its first major transaction since it was spun-out from medical device and supply company Covidien in July. Ofirmev launched in January 2011 and is approved to treat mild-to-moderate pain, for the management of moderate-to-severe pain with adjunctive opioid analgesics, and for the reduction of fever. It has expected net product revenues of $110.5 million for 2013. That’s more than twice the $50.1 million posted in 2012, its first full year of sales. As of Sept. 30, Cadence shareholders included Fidelity Management (7.6 million shares), T. Rowe Price Associates (7.2 million), Capital Research (7.1 million), Wellington Management (6 million), The Vanguard Group (3.4 million), NEA (2.1 million) and BlackRock (1.9 million). Mallinckrodt will pay $14 per share for Cadence, a 32% premium to the trailing 30-trading-day volume weighted average price; in 2006, the company completed an IPO at $9 per share with a valuation of about $250 million. That gives shareholders who bought and held IPO shares a roughly 1.5x return. - Stacy Lawrence and Jessica Merrill

Pierre Fabre/Aurigene: Pierre Fabre Group, the French pharmaceuticals and cosmetics firm whose sales are split almost equally between drugs and skincare cosmetics, has acquired worldwide development and commercialization rights (excluding India) to a novel immune checkpoint modulator, AUNP-12, from the Indian drug-discovery firm Aurigene Discovery Technologies. AUNP-12 is the only peptide under development as a PD-1 immune modulator, the companies say. The candidate could be associated with greater efficacy and fewer side effects when used as part of combination therapies, they announced Feb. 12. The peptide achieves effective levels in vivo after subcutaneous dosing, and has inhibited tumor growth and metastasis in preclinical models of cancer. Aurigene, the Bangalore-based biotech that has collaborated with six of the top 10 pharmaceutical companies since its inception in 2002, will receive an undisclosed upfront payment from Pierre Fabre, and milestone payments based on development, regulatory and commercial progress. The deal terms are in line with others in this space, the companies said. It’s also the first major deal the French company has signed since the death of its founder, Pierre Fabre, in the middle of last year. Pierre Fabre specializes in the development of anti-cancer drugs, either alone or with partners; with marketed drugs that include Javlor (vinflunine) and Navelbine (vinorelbine), while Aurigene is a profitable Indian biotech that generates lead compounds and progresses them to preclinical development in concert with collaborators, particularly in oncology and inflammation. - John Davis

Retrophin/Manchester: Retrophin, which netted $37.4 million in an initial public offering in January, has arranged to purchase privately held Manchester Pharmaceuticals for $62.5 million, including $29.5 million upfront. Announced Feb. 12, the transaction is expected to close on March 1, Retrophin said. Like Retrophin, Manchester focuses on rare diseases. The Ft. Collins, Colo.-based firm has two FDA-approved drugs in its portfolio – Chenodal (chenodeoxycholic acid), which is indicated for patients suffering from gallstones in whom surgery poses an unacceptable health risk due to disease or advanced age, and Vecamyl (mecamylamine HCI tablets), indicated for the management of moderately severe to severe essential hypertension and uncomplicated cases of malignant hypertension. Retrophin said it also will seek quick FDA approval for Chenodal, the only FDA-approved chenodeoxycholic acid, for cerebrotendinous xanthomatosis (CTX), a rare metabolic disorder that can cause severe intellectual disability or even prove fatal in young patients. The New York firm also guided that it anticipates revenue of between $10 million and $12 million this year overall, and $19 million to $21 million in 2015. - Joseph Haas

Debiopharm/Affinium: Swiss biopharma Debiopharm Group broadened its antibiotic portfolio by acquiring key assets from Toronto-based Affinium Pharmaceuticals on Feb. 11. The deal includes two narrow-spectrum anti-bacterial candidates, the Phase IIa FabI inhibitor AFN-1252 and its Phase I prodrug, AFN-1720. Debiopharm also acquired Affinium’s technology platform with which it created the two drugs. Terms of the arrangement weren’t disclosed. Affinium says its drugs represent a new class of antibiotics that inhibit the type-II fatty acid synthesis pathway, known as FAS-II, essential for bacterial growth. Its compounds have shown promise in combating staphylococcus infections, including methicillin-resistant Staphylococcus aureus and vancomycin-intermedia Staphylococcus aureus infections, while allowing intravenous-to-oral switching for patients leaving hospital care. Debiopharm expects to develop a companion diagnostic to select appropriate patients as AFN-1720 progresses through the clinic. Debiopharm entered the anti-bacterial field last fall, when it struck a deal with India’s TCG Life Sciences to develop new antibiotics. The company is aiming to develop drugs that preserve existing gut flora while overcoming resistance to broad-spectrum drugs. Affinium raised $33 million in two rounds of funding in 2007 and 2011, from investors including SV Life Sciences, Genesys Capital Partners, Forward Ventures, Oxford Bioscience Partners and Ontario Emerging Technologies Fund.  - Paul Bonanos

Aveo/Astellas: In our “No-Deal of the Week,” Aveo Pharmaceuticals and Astellas announced Feb. 14 that they have terminated a partnership around renal cell carcinoma candidate tivozanib. The Japanese pharma paid $125 million upfront, with $50 million pegged to cover Aveo’s R&D expenses, in 2011 for worldwide rights, except for Asia, to develop, manufacture and market the compound, a tyrosine kinase inhibitor of all vascular endothelial growth factor receptors. An NDA was filed in November 2012, but an FDA “complete response” letter and unenthusiastic reception at an advisory committee left the companies not expecting approval in advanced RCC. They terminated the trial program for that indication and decided to re-focus on developing tivozanib for breast and colorectal cancers. Now, Astellas has decided to exit the collaboration for what it calls “strategic” reasons, and the two companies are terminating a Phase II program studying the compound in CRC. All rights to tivozanib will return to Aveo as of Aug. 11. - J.A.H.

Photo credit: Wikimedia Commons

Financings of the Fortnight Ponders Neurodegenerative Death And Taxes

The big funding news this fortnight doesn’t come from public or private investors, it comes from taxpayers. As "The Pink Sheet" DAILY reported May 15, the Obama administration formally rolled out its national Alzheimer’s plan, which has been in the works for more than a year.

Alzheimer’s and other dementia-related diseases were already slated to get $450 million in National Institutes of Health funding in 2012, with the same amount proposed by the White House for 2013, but the new plan adds extra money: $50 million right away this year and $80 million proposed for next year, with another $20 million for caregiver support, education, data collection and other services.

Intriguing, then, that in a field where clinical trial costs are often cited as a major barrier to an already-skittish industry getting more deeply involved, nearly half of the extra $50 million for 2012 is earmarked for clinical trials. It won't help struggling biotechs push promising treatments, mind you; $16 million is going toward a prevention trial using the Roche/Genentech-sponsored antibody crenezumab to test still-healthy members of extended families in and around Medellin, Colombia, who share a rare genetic mutation that almost assures them of early-onset Alzheimer’s. The study, which the sponsors consider to be a Phase II adaptive trial, will cost an estimated $100 million. A private research group, the Banner Alzheimer’s Institute of Phoenix, is in charge, and chose crenezumab as the agent last December because it has demonstrated a better safety profile so far in early Alzheimer’s trials conducted by Genentech.

In addition to the NIH’s $16 million, Banner is putting up $15 million. Genentech will pay the remaining costs, but it’s unclear who will pay if the cost runs beyond $100 million. (Genentech spokeswoman Robin Snyder declined to speculate on additional costs but said the company doesn’t expect funding to be an issue.)

However it plays out, the fact of mighty Roche getting subsidies for as much as one-third of a major trial is, at the least, a sign of the importance of making progress – any progress at all – in Alzheimer’s R&D. We’re not complaining; if $16 million of our national treasure brings about an Alzheimer’s breakthrough, or simply speeds the progress toward one, it’s money well spent and a pittance compared to the costly burden of the disease now and a generation from now.

But to be clear: Neither Banner nor NIH accrue any rights to crenezumab, which Genentech licensed from Swiss biotech AC Immune in 2006, so if the trial points toward crenezumab as a viable treatment, Genentech/Roche could be sitting on a gold mine. The trial is expected to run five years, with an interim analysis after two. At that point the investigators would evaluate continuation of the trial to support an application for approval, said Snyder. “We are hopeful that the trial will support an indication, the specifics of which are yet to be discussed with regulatory authorities,” she wrote in an email. “If it works we would like crenezumab to be as broadly available to patients who may be eligible.”

The Banner Institute plans at some point to test the same antibody in people at higher risk for the more common form of Alzheimer’s.

A side note: Steering millions of federal dollars toward potentially groundbreaking Alzheimer’s trials hasn’t yet provoked the same skepticism as the millions being steered toward other drug discovery and development efforts under the new translational center known as NCATS.

Funding crucial Alzheimer’s trials is of course a different proposition than, say, repurposing drugs that have sat on industry shelves or fallen out of use, one of the mandates of NCATS, which had a $575 million budget this year. But both efforts are dollars spent that, in a parallel universe, perhaps, might have gone toward basic biomedical research, a common refrain from critics. (Our START-UP colleagues, who profile a different source of funding for biotech innovation every month in the “Capital Matters” column, wrote about one of the NCATS programs, the Therapeutics for Rare and Neglected Diseases, or TRND, a few months ago. You can read it here.)

Our friends at Pink Sheet are all over the NCATS story, and we suggest you follow along. It will require a subscription, but to paraphrase the late Donna Summer, they work hard for the money. So hard for it, honey. Rest in peace, disco queen, and same to you, go-go king. No one loves to love you, baby, more than…

Arena Pharmaceuticals: Wasting little time, Arena announced May 16 it priced a secondary stock offering and grossed $60.5 million just six days after an FDA advisory committee voted 18-4 in favor of Arena’s weight-loss drug lorcaserin. Arena sold 11 million shares at $5.50 per share, although shares reached as high as $7.02 on May 11, the day of the committee vote. Shares closed May 16 at $5.67. The vote doesn’t guarantee approval of lorcaserin, but it’s a notable reversal. The panel voted down the drug in September 2010, largely due to data that showed an increase in tumors in rat studies. A reassessment of that data, plus new information on the tumors’ causes, reassured the panel this time around that the cancer risk is negligible. Obesity drugs need to meet only one of two criteria set out in FDA’s draft guidance on weight management products: they either must provide a 5% weight loss in 35% of patients on-treatment and twice as many patients on-treatment as on-placebo; or there must be at least a 5% difference between weight loss in the active-product and placebo groups. Lorcaserin met the former standard, but not the latter. (More details about the panel’s decision is here, courtesy of our Pink Sheet colleagues.) Lorcaserin’s PDUFA date is June 27, so Arena’s new cash reserves give it a boost for commercialization, although in a deal expanded just before the committee vote, Eisai owns commercial rights to the drug in the US, Mexico, Canada and Brazil. Underwriters Jeffries & Co. and Piper Jaffray & Co., with help from BMO Capital Markets, have the option to sell up to 1.65 million additional shares. Two other sponsors of obesity are vying for FDA approval. Qnexa from Vivus has a PDUFA date of July 17, and Orexigen Therapeutics, which agreed to conduct a cardiovascular outcomes trial, hopes to re-file Contrave for approval in 2014. -- Cathy Dombrowski and Alex Lash

OncoMed Pharmceuticals: One of the first cancer stem cell companies, OncoMed is now hoping to cash in on the cancer stem cell hype (which just happens to be the subject of a forthcoming feature in Start-Up magazine). After all, OncoMed, founded in 2004, is a relative graybeard of the field, with a couple of alliances under its belt and three programs in the clinic. Tiny Verastem notched a $63 million IPO in late January without anything yet in the clinic, and another company, Stemline Therapeutics, filed its IPO papers in April. OncoMed hasn’t set terms yet, but it won’t be a surprise if it aims sky-high. Venture backers have put at least $170 million into the company since its founding, most of it coming in a massive Series B in 2008. There are seven venture funds and one strategic investor with stakes of 5% or more in OncoMed, led by U.S. Venture Partners (17%), Latterell Venture Partners (12%), and GlaxoSmithKline (12%), which also owns options for worldwide rights to two OncoMed antibodies. GSK can exercise the options at either the end of Phase I or Phase II proof of concept trials. OncoMed owns exclusive rights to its lead compound, the antibody demcizumab, and is currently testing it in two Phase Ib trials, both in combination with chemotherapy agents.  -- A.L.

Egalet: In its second incarnation, Danish pain management firm Egalet Ltd. has raised $14.3 million in Series B financing. The firm restructured and recapitalized in 2010, shedding its cardiovascular program to focus on its abuse-resistant Egalet technology for the development of opioid and non-opioid pain medications.  The company is preparing to advance lead candidate EGP066, an extended-release form of morphine, into Phase III studies. The Egalet platform creates tablets that erode at a controlled rate to produce prolonged- or delayed-release delivery. It also prevents the drug ingredient from being easily extracted, which deters drug abusers from chewing, snorting, or injecting it. First-time investor CLS Capital joined returning shareholders Atlas Venture, Omega Funds, Sunstone Capital, and Index Ventures, which committed to a two-tranched €2 million ($2.6 million) Series A round in August 2010.  Prior to the recap, Egalet A/S had raised at least $60mm in venture financing. In December 2009, it out-licensed its CV compound, the beta blocker EGP042, to RedHill Biopharma. The firm has a second formulation technology, Parvulet, that creates a soft pudding-like substance that can be eaten with a spoon. Farther down its pipeline are extended-release versions of oxycodone, hydrocodone, and hydromorphone. -- Amanda Micklus

Dynavax Technologies: Like Arena, Dynavax is a veteran biotech hoping to soon celebrate its first product launch, with the hepatitis B vaccine Heplisav now before the FDA for review. Dynavax tapped the public markets, raising $74.4 million on May 9 before deductions and expenses. It sold 17.5 million shares at $4.25 apiece, adding more than 10% of its share count to the outstanding base. If that’s not enough dilution, underwriters have the option to sell another 2.6 million shares. What’s more, Dynavax also announced just before the share sale that longtime CEO Dino Dina will step aside for a more commercially experienced successor. He’ll remain CEO until the search is complete, and he’ll also keep his board seat, Dynavax said. Investors didn’t take kindly to the CEO news or the offering, which was priced 17% below the previous day’s close of $5.09. Shares have continued to decline, closing May 17 at $3.76. But Dynavax needs the cash, as it owns full rights to Heplisav, for now at least, and says it intends to launch it independently in the US. Historically, biotechs that keep worldwide or at least US rights to their first commercial products fare better in the long term, but a successful launch is no guarantee. Dendreon’s prostate cancer treatment Provenge (sipuleucel-T) and Human Genome Sciences’ breakthrough lupus drug Benlysta (belimumab), both hailed as welcome additions in under-served indications, have faltered badly out of the gate. That's led to new management for Dendreon and, for HGS, a hostile takeover bid from marketing partner GSK. -- A.L.

Image courtesy of flickr user brain_blogger. How appropriate.

DOTW: It's Hot, Hot, Hot

There's nothing like a big deal to get the blood pumping, especially given the lassitude-inducing temperatures hitting most of the US. And just as journos were reminiscing about the good ol' days of hostile then friendly pharma-biotech tie-ups, Express Scripts and Medco deliver a deal with enough uncertainty to keep tongues wagging for months -- or at least until the FTC makes a ruling on whether the marriage merits its blessing.

Who knew pharmacy benefits could be so sexy?

As "The Pink Sheet", WSJ, Fortune, and other pubs have noted, anti-trust concerns are the primary question for investors. And given Medco's stock price mid-day July 22 -- shares were up 18% relative to the day before news of the tie-up broke but still well below Express Scripts' $71.36-a-share offer -- the market clearly believes this ain't a deal that will definitely get done.

Aside from the "Will they? Won't they?" questions tied to FTC, there are plenty of other uncertainties bubbling up (like apple pie fresh from the oven or hot asphalt on the Garden State Parkway). For starters, how will this deal impact drug companies and the kinds of rebates they need to offer to get their drugs covered by such a PBM behemoth? Ross Muken of Deutsche Bank estimates Express Scripts and Medco together process a whopping 35% of all US prescriptions and the WSJ's "Heard on the Street" column pegs the rebates both PBMs collected in 2010 at around $12 billion.

That's a lot of dough -- and could be a reason FTC will eye the merger sympathetically. Rebates after all get passed on to customers -- the employers and health plans who contract with the likes of Express Scripts and Medco to manage their pharmacy spend. Theoretically, the ability to negotiate better rebates means greater control over drug costs, one of the major factors tied to spiraling health care spend. Not surprisingly that was a message management from both PBMs played up in their joint conference call announcing the deal.

Of central interest to drug makers ought to be how a combined Express Scripts-Medco will negotiate rebates for specialty drugs like cancer medicines. Pharmas have doubled down on nichier areas because the high unmet medical need and grievous nature of diseases like cancer, lupus, and rheumatoid arthritis has -- at least historically -- offered tremendous pricing freedom. That's starting to change; the increasing number of oncologics for renal cell cancer, for instance, means payers can choose -- based on efficacy and cost -- which medicines to prioritize without being crucified for denying care. With so much profit stemming from specialty medicines, drug makers are sure to be wary about the negotiating power of an enlarged Express Scripts: more rebating to get coverage for their meds will definitely start to eat into profits.

We'll have more to say about the implications for specialty drug spend in the coming issue of "The Pink Sheet", even as we try to understand another key unknown: how will this merger impact personalized medicine initiatives already underway at both companies?

With integration plans likely focused on simply making this massive entity work logistically, how much energy will be devoted to the interesting (but admittedly not explicitly bottom-line focused) research efforts spearheaded by Felix Frueh and company at Medco Research Institute? Paradoxically any de-emphasis on those initiatives ought to give drug cos something to cheer about. Frueh's team after all has helped resurrect warfarin use and the group looks to be doing the same thing in RA with methotrexate.

With so many questions, it's no wonder debate about the deal has reached a fevered pitch. While we dig for answers, bide your time with a spin through biopharma's latest wheeling and dealing. It's ...

AMAG/Allos: Mergers of equals can be a hard sell to shareholders (remember Biogen and Idec?). Thus it's hardly surprising that Wall Street -- and pundits -- reacted quickly and skeptically to the proposed merger between AMAG and Allos, announced July 20. Execs from both companies argue the deal helps their one-product companies move into the black, and speeds growth, helping to overcome the disappointing launches of the iron deficiency therapy Feraheme (AMAG), and oncology drug Folotyn (Allos). The companies plan to combine their sales forces to sell both drugs, via a combined team of about 75 reps. In addition, the companies claim they can achieve cost synergies of between $55 million to $60 million, by cutting R&D and administrative overhead. Yet it's hard to see the synergies afforded by two very different products. Can the sames sales reps really detail both products given the lack of overlap? Folotyn, after all, is a high-priced drug aimed at specialist doctors and a small patient population, while Feraheme has a much broader patient population and prescriber base. Thus, analysts worry the proposed merger resulted because the companies lacked any better options. (It's a case of 1+1 not even equaling 2, let alone the 3 you'd want to get to justify the integration upheaval.) It will be interesting to see if shareholders get fired up about the merger in the coming weeks; it wouldn't be surprising if significant AMAG investors like Palo Alto Investors and Adage Capital Partners objected. These firms could just as easily argue a dividend is more likely to add value than the proposed merger. --Lisa LaMotta and EFL

Pfizer/Icagen: Pfizer announced July 20 plans to buy its partner Icagen, which develops sodium ion channel modifiers for pain, as part of efforts to bolster the big pharma's capabilities in this therapeutic area and expand its newly created Neusentis research unit. Under the terms of the deal, Pfizer will acquire the outstanding 8.3 million shares of Icagen it does not already own for $6 per share. The deal is valued at $56 million, including the 11% of Icagen Pfizer already owns, the firms said. Recall the two companies have been partners since 2007 when they entered into a collaboration for the discovery, development and commercialization of compounds that modify three sodium ion channels. Over the next two years, Pfizer invested $38 million upfront, including $15 million in equity and $11 million in R&D funding. Meantime, Pfizer clearly believes there is significant market potential in new pain meds; just months after CEO Ian Read announced a restructuring to refocus Pfizer around its innovative core, the drug maker established Neusentis in Cambridge, England to develop new therapies for pain, sensory disorders and regenerative medicines. Ruth McKernan, who heads the newly minted CNS group, told "The Pink Sheet" DAILY Pfizer was increasingly interested in potential new therapies targeting ion channels. Based on this, she claims a strategic partnership with Icagen "made more sense" than relegating the biotech to working on just one or two programs. --Jessica Merrill

Allergan/Vicept Therapeutics: Wasn't it only last week that J. Michael Pearson, CEO of Valeant, notched two acquisitions in his quest to build that specialty-focused, anti-R&D outfit into an dermatological power-house "bigger than anyone else's"? Looks like Allergan is going to give Valeant a run for its money. The maker of Botox has been building its medical dermatology portfolio, and the acquisition this week of privately-held Vicept Therapeutics aids this ambition, providing the bigger spec pharma with V-101, a Phase II daily topical cream to treat the redness associated with rosacea. Under the terms of the deal, Allergan has agreed to pay $75 million upfront plus another $200 million in regulatory and development milestones. Vicept investors are also eligible to receive undisclosed payments should certain sales milestones be reached. That's a tidy -- and quick -- exit for Vicept's backers, which include Sofinnova, Vivo Ventures, and Fidelity Biosciences. The VCs only staked Vicept two years ago with a $16 million Series A, meaning the upfront payment alone affords them a 4.6x step-up on their venture dollars. (Add in the known earn-outs and the theoretical return jumps to around 17x.) With the entrance of Valeant as a prime derm player, the number of potentially interested acquirers of products in this space continues to increase. Long-considered a pharmaceutical back water with innovation essentially meaning reformulation of existing medicines into topicals, dermatology is enjoying a renaissance. Who knows? With a few more exits like Vicept's, this particular TA could have VCs crooning "I've got you under my skin."--EFL

BMS/Amira: The latest addition to Bristol-Myers Squibb’s pipeline-refreshing “string of pearls” strategy is Amira Pharmaceuticals, which BMS acquired July 21 for $325 million up-front. The deal, which could bring in another $150 million in milestone payments, centers on Amira’s fibrotic disease holdings, including idiopathic pulmonary fibrosis and scleroderma treatment AM152. Scheduled to enter Phase II later this year, the drug is one of several racing to become the first approved IPF treatment in the US. BMS also gets Amira’s autotaxin program, which has shown preclinical promise in neuropathic pain and cancer metastases. The acquisition represents a strong exit for Amira stakeholders including Avalon Ventures, Prospect Venture Partners, Versant Ventures and Novo Ventures, which have supplied Amira with $28 million in two rounds since 2005. The deal doesn’t cover certain Amira assets which will be spun out, however; a new LLC shell company has been organized to collect ongoing revenues from an existing partnership with GSK around a Phase II asthma treatment, and another has been set up for its unpartnered asthma and COPD programs, which Avalon’s Kevin Kinsella said are likely to be sold. BMS will retain San Diego-based Amira’s key scientific staff following the deal. – Paul Bonanos

Image courtesy of flickrer Lori Greig via a creative commons license.

Post-Christmas Pain

There was more bad news on Dec. 27 for those developing anti-nerve growth factor (NGF) drugs: U.S regulators put Regeneron's candidate REGN475, in development with Sanofi-Aventis, on hold late last week, Regeneron said in a regulatory filing Monday.

The latest setback for an NGF inhibitor was triggered by a patient in another company's trial developing a serious bone disorder, known as avascular necrosis. It's caused when a lack of blood supply causes bone tissue to die.

Following similar concerns around other NGF-targeting drugs in 2010, it's no surprise that by now FDA believes the whole class of drugs could be unsafe. Regeneron says as much in its filing: "The FDA believes this additional case provides evidence to suggest a class-effect." No word yet if or when REGN475, also known as SAR164877, will get a green light, but Regeneron noted that there are no current trials of the drug either enrolling or recruiting patients.

Trials in osteoarthritis pain of Pfizer's anti-NGF candidate tanezumab, believed to have been the most advanced in development, were put in hold in June 2010 following FDA concerns that a number of patients' osteoarthritis symptoms were worsening, rather than improving. In some cases this led to joint replacements. Because of the hold, Pfizer terminated most of its tanezumab trials earlier this year, but it is pressing on with two trials to study the drug, one in combination with opioid medication, the other as a standalone treatment in patients with chronic pancreatitis, according to clinicaltrials.gov.

None of this will provide much Yuletide cheer to the likes of Abbott, which paid a whopping $170 million up-front for PanGenetics' Phase I anti-NGF antibody last year, or AstraZeneca, whose MedImmune subsidiary has a Phase I stage anti-NGF antibody for osteoarthritic pain in the knee. J&J picked up a similar candidate from Amgen in 2008. [UPDATE: AZ and J&J have in fact suspended their programs, reports Bloomberg.]

Also in the pain domain but more positive was the news that King Pharmaceuticals and Pain Therapeutics' re-submission of abuse-resistant oxycodone (Remoxy) was accepted by FDA. This time, Pfizer will be pleased: it has agreed to buy King for a cool $3.6 billion.

Image by flikrer johnnyalive used under a creative commons license.

Financings of the Fortnight Checks in on the A-List

Our colleagues at Start-Up do a little thing every year they call The A-List, in which they slice, dice, julienne and slow-cook the year's biopharma and med-tech Series A venture rounds as a way to gauge the health and direction of the industry. If the annual A-List is a three-course meal, consider this post a snack to tide you over.

Four months into 2010, we take a step back and ask: "How are biotechs faring as they try to tap into crucial early-stage funding?"

Not so great, according to Elsevier's verison of the Magic 8-Ball, the Strategic Transactions database. Early-stage biotechs raised $163 million via 15 A rounds through April 30, with the average financing pulling in $10.9 million. (If a deal was tranched -- and many were -- we only count the tranche raised, not previous or future tranches included in the same round. For example, Flexion Therapeutics raised $9 million from Pfizer as part of a much larger A round, but only the Pfizer money was announced this year.)

At this pace, biotechs will raise $652 million in Series A money in 2010. In 2009, the figure was $842 million, and in 2008 it was $709 million. Filter out the massive $145 million A round pulled in last year by Clovis Oncology, and 2009 is still ahead of this year's pace. Paces can change, of course, and last month was one of the busiest for Series As in the past two years.

And that must mean momentum, except that... sigh... it doesn't. So far in May we've seen just one biotech Series A, the low-key Swedish cardiovascular play Cardoz (more on them later).

One trend carrying over from last year is the involvement of corporate venture investors. Last year, about 20% of all venture deals included corporate cash, and 40% of the top-dollar Series As had at least one corporate investor. This year, three deals have had a corporate element. Pfizer leads the Series A corporate pack so far with the aforementioned $9 million funneled into Flexion.

It's early to make grand prognostications on four months worth of data. Still, the numbers are worth monitoring as an indicator of VC health. It boils down to this: Will venture capital rebound to previous norms as the economic wheel turns to the good, or will we emerge from the cave of the global recession squinting at a fundamentally changed landscape in which traditional VC is no longer the dominant source of funding for early-stage R&D? There's a case to be made we've been headed that way for a while, even before the financial crisis. We're curious to see how 2010 eventually fits into the grander of scheme of things. Meanwhile, life goes on, and life requires cash, not to mention long walks, fresh air, and feta cheese. What else can you not live without? How about...

Ikaria & NuPathe: A funny thing happened on the way to this year's IPO window. Ten biotech issues that registered last year have gone public this year, ranging in size from Ironwood’s $203 million take in February to Australia’s CBio, which garnered a tiny $6.2 million. But until the past fortnight, no biopharma had filed an S-1 in 2010 -- how's that for enthusiasm? That is, not until Ikaria, which filed its S-1 on May 13, and NuPathe on May 14. Neither has set terms, though Ikaria used the rather ambitious placeholder of $200 million, while NuPathe went for the more typical $86 million. Haircuts have been the rule not the exception in this year’s IPO market, so don't be surprised if they are extra cautious as their bankers gauge the market. One positive for both companies: their assets are in late-stage clinical trials. Ikaria’s Lucassin is entering Phase III in hepatorenal syndrome, and NuPathe already has advanced its migraine drug, Zelrix, through Phase III and hopes to win approval and launch by 2012. Also of note: Whether Ikaria goes public or not, it will distribute a $130 million dividend to 12 company officials this quarter, payable from a new $250 million loan. Ikaria says the payout is a one-time deal. Prospective investors should also note that Ikaria's top investor New Mountain Partners will continue to run the show post-IPO, controlling as many as three board seats. -- Joseph Haas

Cardoz: After a boffo April for early-stage funding, only one biotech reeled in a Series A round this past fortnight. Spotlight, then, on Cardoz, a low-profile Swedish startup working on repositioned drugs. It doesn't have a Web site, so its investors announced a SEK 100 million round (about US $13 million), which Cardoz will receive in two tranches that aren't tied to milestones, Cardoz CEO Carl-Johan Dalsgaard told IVB. The funding comes from a European syndicate led by Dutch firm Forbion Capital Partners. YSIOS Capital Partners of Spain and Sweden's HealthCap, where Cardoz was incubated and Dalsgaard is a partner, also joined. Its lead compound, the origins of which Dalsgaard declined to reveal, is already in the clinic, and the cash will help push it through Phase II to treat abdominal aortic aneurysms. Cardoz also has a preclinical program to develop novel inhibitors of leukotriene A4 hydrolase. -- A.L.

Sequenom: Look who's back. In April 2009 the diagnostic firm Sequenom admitted employees mishandled data from its Trisomy 21 Down syndrome test, resulting in the dismissal of CEO Harry Stylli, among others, federal investigations, and accusations of insider trading. But new management has recouped enough investor confidence to boost the stock -- if not quell skepticism in other corners -- and raise $51.6 million in a private placement announced on May 12. It was much-needed cash, as Sequenom reported only $30 million in the bank at the end of the first quarter. There's a caveat to the comeback: Sequenom sold the 12.4 million shares at $4.15 each, a 23 percent discount to the previous day's close. On its May 6 earnings call the new management team detailed a clinical development plan using outside data and also, for the first time, clarified that the Trisomy 21 test will be DNA-based (it is now being run on Illumina’s sequencing platform). Whether a Trisomy 21 diagnostic gets to market -- as a laboratory developed test (LDT) by the end of 2011, to be followed by a PMA application for regulatory approval by the end of 2012 -- remains a question, but the company is at last giving details. That, plus the significant discount to its stock price, certainly helped complete the financing. -- Mark Ratner

NeuroTherapeutics Pharma: The B-list needs some attention, too. This Chicago-area startup said May 20 it pulled in a $43 million Series B, notable not just for its size but for its participants, which include corporate funders GlaxoSmithKline and Pfizer. NTP's lead molecule, NTP-2014, has potential applications across numerous diseases, including epilepsy, pain and other CNS indications, according to the company. The drug is still in preclinical development with an IND filing planned for later this year and trials planned in pain and epilepsy. As noted in our intro, corporate funders played an ever-larger venture role last year. We also take note of the presence of GSK's SR One fund. This is the first SR One deal we've heard of since the big re-org, or should we say, the latest big re-org, with ex-Sirtris chief Christoph Westphal taking the reins as he also tries to launch a separate fund that reportedly has cash from GSK. Meanwhile, it's Pfizer's second venture deal this year. NTP officials told "The Pink Sheet" they did not give away any rights, such as right of first refusal or options, in order to secure the financing. NTP chairman Heath Lukatch, a partner at Novo Ventures, said the Series B cash should see the firm through three years and three "robust" Phase IIa trials in pain and epilepsy. -- Jessica Merrill

Photo courtesy of flickr user cheesy42.

Abbott/PanGenetics Turns Early-Stage Dealmaking on Its Head

Just how big is the $170 million up-front payment that Abbott ponied up for PanGenetics' PG110 anti-NGF antibody yesterday?

Absolutely enormous. In fact so far as we can tell, it's the largest up-front payment for a Phase I project, ever (and Phase I isn't even complete yet). Put the payment in the context of today's earn-out heavy, let's-share-the-risk dealmaking climate, where options-to-maybe-consider-licensing-in-the-future are de rigeur, and it's positively mind bogglingly gigantic. Of course there's a reason for that, which we'll get to below.

So what did Abbott buy? PG-110 is a monoclonal antibody that hits nerve growth factor and is being tested in patients with osteoarthritis pain. Abbott will broaden out the program should that first clinical study prove successful: chronic back pain, cancer pain, diabetic pain, etc.

NGF is a very promising pain target for drug developers. Right now Pfizer leads the way with a Phase III project it acquired when it bought Rinat in 2006 (that candidate, tanezumab, was Rinat's lead molecule--in Phase II at the time). Sanofi's in the game with Regeneron (more on those lovebirds later today in DOTW), with a Phase II anti-NGF mab, and J&J bought rights to Amgen's NGF project AMG-403 for $50mm up-front plus $385mm in milestones.

That last agreement is particularly illustrative of what PanGenetics is perhaps leaving on the table in its Abbott deal, and the main reason Abbott paid such a massive up-front. No doubt this was a competitive situation and PanGenetics was offered all manner of deal terms. But it went with a deal that turns the very notion of early-stage risk-sharing deals on its head. It's essentially an anti-biobucks deal, and it's fundamentally a result of the company's unique business model.

That huge $170 million up-front is accompanied by only $20 million in potential milestone payments. What's more neither the release put out by PanGenetics nor the one by Abbott mentions anything about royalties.

Surely it can't be. A biotech-pharma deal without a downstream royalty? Where the biobucks hardly factor?

That's exactly it. PanGenetics' investors have no downstream piece of PG-110's upside. And it gets more interesting. PanGenetics, says chairman and Index Ventures partner Francesco De Rubertis, is actually set up and run as two separate, asset-focused companies. So the sale of the NGF product (the second product is further along and targets CD40) resulted in an exit for the company's investors.

De Rubertis would not comment on the return Index and others achieved on the deal. (But rest assured it's quite good.) PanGenetics was seeded by Index in 2005 to find early stage antibody assets and quickly develop them to the point where pharma would step in and buy them. A handful of other investors have since come in through two subsequent rounds totalling €36 million (that cash is spread across the two PanGenetics companies evenly). Index holds a 40% stake in each company and the whole 18-person operation is run by ex-Cambridge Antibody Technology CTO Kevin Johnson, who De Rubertis credits with the fast pace of PG-110's development.

We'll get into the nuts and bolts of Index's single asset-focused company creation strategy in the next issue of Start-Up.

When Life Gives You Lemons, Make Lemonade (Caution: side effects may include forgetting you made lemonade)

Developing drugs that block the pain receptor TRPV1 just got a whole lot more complicated.

A study published in today's issue of the journal Neuron suggests these drug candidates may interfere with learning and memory, and that this action may be responsible for the reported psychiatric side effects of Sanofi-Aventis' rimonabant, as well.

A quick search through our Strategic Transactions Database throws up at least two recent TRPV1 deals--by Eli Lilly and Wyeth--to gain access to inhibitors of the receptor (which goes by the full and catchy name of transient receptor potential vanilloid 1). Lilly paid Glenmark $45 million up front plus milestones for access to the TRPV1 inhibitor GRC6211 just last November and Wyeth teamed up with Mochida Pharmaceuticals in January (naturally, Deals of the Week! was there to cover these for you in real-time). Activation of TRPV1 causes pain associated with inflammation and is triggered by molecules like capsaicin, which is found in chili peppers.

Wyeth and Lilly and others (such as NeurogesX, Pfizer, and Merck) aren't intending to mess with the brain, of course, they're targeting the receptor in the peripheral nervous system to ease pain associated with osteoarthritis, neuropathy, and other maladies. But the researchers, led by Brown University's Julie Kauer, working with slices of rat brain demonstrated for the first time the function of TRPV1 receptors in the CNS, where they appear to be part of the neural circuits of learning and memory in the hippocampus.

From the press release accompanying the paper:

“The broad distribution of TRPV1 receptors in the brain suggests that these receptors could play a similar role in synaptic plasticity throughout the CNS.” ... The researchers said their findings suggest that drugs targeting TRPV1 could act not only on pain receptors in the PNS, but in the brain as well. They also wrote that their findings and those of other researchers “indicate that drugs that bind to CNS TRPV1 receptors are likely to influence more than just pain-related functions.”

Kauer and colleagues also noted that TRPV1 was inhibited by rimonabant, possibly introducing new headaches for Sanofi-aventis and other -abant hopefuls like Merck & Co. (the latter has yet to officially comment on the abstract referring to some poor Phase III data due to be presented later this month at the big ACC meeting in Chicago).

But wait, you say, we understood there was to be lemonade? Fair enough. Despite the fact that Kauer's findings "have important implications for the development of drugs targeting TRPV1," and that they "cloud the prospects of TRPV1 analgesics," there may be some good news, according to the authors of a preview of the paper (also in Neuron), Benedict Alter and Robert Gereau, from the pain center at the Washington University School of Medicine.

Apparently, TRPV1 inhibitors that act both in the periphery and in the brain actually work pretty well at soothing pain. And what's more the drugs could find uses in other brain disorders, such as epilepsy, Alter and Gereau write.

Pain is a notoriously tricky clinical space that is nevertheless receiving quite a bit of pharma attention--Pfizer devoted more time to pain at its recent analyst day than to any other therapeutic area, to our surprise. Though this is just one study, in rats, and concerns just one target, it's another reminder that the science of pain and pain relief is complex, and in its early days.

Hat tip: Reuters

J&J Tests FDA's Pain Threshold with Tapentadol

One line in Johnson & Johnson’s press release yesterday announcing the submission of a New Drug Application for the pain therapy tapentadol caught our eye:

"More than 1,800 patients have been treated with tapentadol IR tablets in clinical trials to date."

Which got us thinking: what makes J&J think they can get a new-ingredient product approved as a pain killer at today's FDA with data on only 1,800 patients? Haven't they noticed how tough it is to get new drugs through FDA, especially in the pain category?

Here are some possible answers:

(1) They are self-absorbed egotists with unfounded views of their own power and infallibility. But that can't be it, can it?

(2) J&J thinks that FDA will relent on pain products in the next year or so. It never hurts to be optimistic, but we haven't seen any signs of that yet.

(3) The product is for limited indications; J&J has a risk management program that will assure that it will stay in that population and they will sell the program to FDA as well as the drug’s safety.

Well, the press release says the product is for "moderate to severe pain" supported by studies in "patients undergoing bunionectomy surgery or for patients with degenerative, end-stage joint disease of the hip or knee," supported by a third study in "outpatients with low back pain or pain from osteoarthritis of the hip or knee." So it sure sounds like J&J is going after a big market based on relatively small studies. Not exactly a recipe for success by cautiously selecting a sub-population.

(4) There is something different about the way this product works which means that it will have no safety or abuse issues.

It surely doesn’t sound that way in the press release. J&J says it has "a unique profile with two mechanisms of action, combining mu-opioid receptor agonism and norepinephrine reuptake inhibition in a single molecule." That may be a great profile, but from a safety perspective it suggests a higher burden on J&J to show that the drug is free of two different potential risk profiles.

As for efficacy? According to J&J "data from these clinical trials suggest that tapentadol has efficacy comparable to strong opioids."

Is this a winning profile at today's FDA? We'll all find out later this year.

Deals of the Week: "King of Pain" Edition

Admittedly, it's been a quiet week for biz dev in pharma land. The big news has been clinical. On the positive side, the diabetes triumvirate of Amylin, Alkermes, & Lilly published studies on October 31, reviewed here , showing that long-acting Byetta has staying power. And then there's the therapeutic effect of good vibrations. On the negative side, GPC's stock price cratered on the news that accelerated approvals aren't really under threat, it's just that satraplatin doesn't work as advertised. Bad news from Lilly and Daiichi too, who announced this week that they are suspending two prasugrel trials due to concerns about side-effects.

And a new survey posted this week--this time from IMS--gives pharma execs yet another reason to worry: US pharmaceutical sales for 2008 are projected to increase at their slowest rate since 1963 as cheaper generic drugs drive down prices and docs write fewer scripts for medicines tied to harmful side-effects. (At least sales are increasing, right?)

But in case you missed them, here's the deal-flow round-up:

• Lilly inked a deal with India-based Glenmark Pharmaceuticals to acquire rights to a portfolio of TRPV1 antagonist molecules, including a Phase II compound, GRC 6211, for osteoarthritic pain. Terms of the deal: Lilly pays Glenmark $45 million up-front and up to an additional $215 million in milestones. The deal's a bit surprising--according to Windhover's Strategic Transactions Database, the pharma has signed only 12 deals in the pain space since 1994 and three of those transactions were out-licenses, including a $211 million deal to NeoSan for US rights to Darvon and Darvocet N.


• King Pharmaceuticals signed a deal with Acura Pharmaceuticals worth $30 million up-front and up to $28 million (per product) in milestones to develop and commercialize 4 of Acura's immediate release opioid analgesics. This isn't King's first foray into pain of course. Nearly two years ago, the company inked a much bigger deal with Pain Therapeutics for that company's Phase II, abuse-resistant, long-acting oxycodone product Remoxy. (See this March 2006 IN VIVO story for more.) Perhaps this week's deal is a signal that King is returning to a specialty focus centered on neuroscience and hospital/ acute care--the "King of pain," perhaps? That may be necessary for the company's survival. Last week King announced it was slashing 20% of its work force after losing patent protection on its heart failure remedy Altace.
  
• Another spec pharma deal: NycoMed announced it was purchasing Bradley Pharmaceuticals for $346 million. The reason: "This brings together the strengths of both companies with the objective of creating a leading specialty pharmaceutical player in dermatology," said Paul McGarty, Chief Executive Officer of Nycomed US, in the company's press release. European spec pharma companies have been knocking on the door to the US via acquisitions--witness also the Meda AB acquisition of Medpointe earlier this year (at nearly $800 mm). We won't be surprised to see more of these.
  
• Finally, on November 1, Merck inked a deal with Dynavax worth up to $136 million for rights to that biotech's Phase III Hep B therapy, Heplisav, which promises an easier dosing schedule and potentially better efficacy in weakened immune systems than the drug Recombivax HB Merck already markets. Heplisav combines a segment of the hepatitis B virus and a DNA sequence that activates a toll-like receptor, triggering an early immune response. While the terms of the agreement weren't overwhelming, it's signing suggests the following: 1) There is still faith in the Toll-like receptor field despite Coley Pharmaceutical's high profile failure last January; 2) Pharmas continue to show interest in vaccines, thanks in part to new adjuvants that allow the development of more potent medicines that also come with higher price tags. (See this September 2006 story by our RPM brethren for more.)

Another Co-Promote Bites the Dust

When Merck and partner Neuromed yesterday pulled the plug on Phase II chronic pain treatment NMED-160/MK-6721, another co-promote bit the dust, too.

More proof, then, that most co-promote options built into today’s biotech-pharma licensing deals are just window-dressing—comfort cushions for biotech investors dreaming of drug revenues and spec pharma success. Earlier this year we laid out in IN VIVO some of the reasons why fewer than 10% of co-promotes actually turn into market-place reality.

That statistic reassures the Big Pharma partner—most of which hate the thought of sharing their commercial spoils with inexperienced biotech, even if some of them say otherwise. But the main reason co-promote promises don’t often become reality is product discontinuation, as in this case, which helps no-one.

Luckily for Neuromed, the aborted program, an N-type calcium channel blocker, wasn’t its lead. Not since April 2007 anyway, when the biotech licensed US rights to a Phase III extended-release opioid analgesic OROS Hydromorphone from Johnson & Johnson’s Alza.

This deal means Neuromed may yet fulfil its dream, shared with most other biotechs, of setting up its own specialist sales force. And Neuromed may yet get to co-promote products with Merck, since the 2006 deal granted the biotech the option to co-promote to US specialists any N-type calcium channel blockers emerging from the collaboration—and the partners say they’ll keep looking for others.

But with NMED-160/MK-6721 gone, at least in pain, Neuromed will miss out on at least $202 million in milestones, and possibly more. It also paid $30 million up front for OROS. That product had better make it onto the US market (it's approved in Europe, but still not in the US, seven years after an approvable letter ). Otherwise private Neuromed may be in danger of biting the dust, too.

Ouch. The Pain of Pain

The wheels grind slowly but they sure do grind.

After four years of legal wrangling, this morning, Purdue Pharma--one of the biggest private drug companies in the US--and three top executives pled guilty in Virginia court to mishandling the pre-2001 promotion of Oxycontin, the company's blockbuster pain drug. The punishment: $600 million.

Purdue can afford the settlement; it won't lay off anyone, apparently. Except its own top management--the company's president Michael Friedman, one of the executives pleading guilty--is getting the boot and, according to the New York Times, an $18 million fine; likely to follow is chief legal officer Howard Udell, who also pleaded guilty (and, says the Times, is on the hook for $9 million). The final misdemean-er--former research head Paul Goldenheim--left Purdue in 2004 for Transform Pharmaceuticals, which was sold soon after. He'll owe $7.5 million.

The settlement is bad news--potentially really bad news--for other companies in the pain space, in particular Cephalon and Endo. Both of these public companies are being investigated for over-aggressive promotion. If those two companies end up with a settlement anything like Purdue's--and federal and state attorneys are likely to feel pretty good about their chances, given the success of the Virginia US attorney--the picture won't be pretty.

Purdue itself, leaderless now, will drift. The company's hired Russell Reynolds to do a CEO search, but no one's looking forward to that one. Friedman, the first non-Sackler to run Purdue, had spent 20 years building up the trust of the family, hardly an easy group to work for. Indeed, talk about an insider board: Purdue's has members: the 90-plus year old founding brothers, Mortimer and Raymond Sackler; their wives; and the founders' four adult children.

They could bring in an internal candidate--like Ed Mahony, the current CFO, a savvy finance guy who's managed to keep enough cash to pay the fines. Or they could bring on someone from one of the international affiliates. Possibles: John Stewart, a long-time employee who manages the Canadian, New Zealand and Australian businesses, or--less likely given his shorter tenure--Ake Wikstrom, the GM of Munidpharma in Europe.

But no Sackler is likely to step in and settle all this hash. None of the 2nd generation Sacklers have ever managed the company. When times were good, the family rejected many offers to buy the business, or take it public. Now that times are really bad--and now that the family doesn't have a CEO they can depend on--they may just decide enough is enough.

In fact, the whole scandal could really be laid at the doors to the family's often empty offices at Purdue's headquarters: though they approve decisions, they let others watch what is a deceptively simple business. In selling addictive pain drugs, there are lots of complex details to follow. For too long, Purdue's management didn't recognize them; neither did its board.

That complexity colors the benefits of the whole pain strategy. Purdue, like Cephalon and Endo, are in the pain business because they can minimize R&D risk with high-margin reformulations of old and effective pain drugs. But there's no free lunch: the risk they avoid in development they run in the marketplace selling opiates.

Already, many pharma companies--AstraZeneca and Pfizer being two recent examples-- are being roasted for promotional improprieties. With Purdue's blood in the water, the legal sharks aren't likely to grow any less hungry.