Welcome to the latest edition of our weekly EuroBiotech Report. The European Commission is investigating the United Kingdom's patent box--which partly motivated Pfizer's ($PFE) pursuit of AstraZeneca ($AZN)--and other tax laws in the region. In eastern Europe, two biotechs at opposite ends of the clinical trial process detailed their fundraising plans. VBL Therapeutics is the more advanced of the two, with the Israeli biotech planning a $75 million IPO to fund a Phase III trial of its brain cancer drug. Poland's Selvita is just starting out on its strategy to develop a clinical-stage oncology pipeline, with the most advanced of its drugs set to begin testing in humans next year. AstraZeneca and Merck KGaA struck deals with European biotechs as part of their efforts to wheel and deal their way to stronger pipelines. Merck KGaA moved to make up ground on the likes of Bristol-Myers Squibb ($BMY) and Roche's ($RHHBY) Genentech in the hot immuno-oncology field by inking a deal with German biotech MorphoSys (FSE:MOR). AstraZeneca will look for a more immediate payoff from its deal with Synairgen (LSE:SNG), which saw it commit to $232 million in upfront and milestone payments to in-license a Phase II respiratory drug from the British biotech. And more. Nick Taylor (email | Twitter)
1. EC steps up probe into patent boxes that benefit GSK and other EU biopharma
2. VBL plans $75M IPO to advance mid-phase oncology, anti-inflammatory drugs
3. Selvita secures cash to move drug into the clinic for the first time
4. MorphoSys strikes deal to help Merck KGaA find its niche in immuno-oncology
5. Synairgen ends long search for partner with $232M AstraZeneca deal
And more >>
When the United Kingdom unveiled its patent box in 2012, the tax break it promised made an immediate impact, with GlaxoSmithKline ($GSK) committing to build its first domestic plant in more than 30 years. Now the patent box could be under threat, with the European Commission (EC) investigating the U.K. scheme and similar arrangements in 8 other countries.
|EU antitrust chief Joaquín Almunia|
The U.K. introduced the policy in a bid to encourage investment in innovation by lowering the rate of tax paid on profits from domestically developed and registered patents. Drugmakers will pay tax of 10% on profits that fall into this category, compared to 21% for other earnings. GSK expects the law--which is thought to be one of the factors that motivated Pfizer ($PFE) to bid for AstraZeneca ($AZN)--to contribute to a dip in its tax rate this year, but some are less impressed.
German Finance Minister Wolfgang Schäuble grumbled about such schemes last year, the Wall Street Journal reports. And the EC stepped up its investigations into patent boxes in March amid suspicions that the model does little to boost R&D investments. With governments and citizens across Europe reining in spending in the wake of the financial crisis, newspaper headlines about U.S. corporations paying minimal taxes on massive profits have angered people across the continent.
As well as looking into the patent boxes, the EC is investigating tax practices at Apple, Fiat and Starbucks. Biopharma companies have yet to enter the EC's crosshairs, but any changes to the patent box or attempts to stop the labyrinthine arrangements some corporations use to minimize tax bills would affect the industry. Earlier EC efforts to clamp down on tax schemes have struggled to make an impact, but experts think the latest probe's use of state-aid laws could give it teeth.
If the tax breaks are ruled to be state aid, companies could have to pay out. The impact of any changes to patent boxes would not only affect the tax rates of individual companies but also reshape the European M&A landscape. Some think this is unlikely, though. "What normally happens is, modifications are made to comply with state-aid rules," Kevin Phillips, a tax partner at accounting firm Baker Tilly, told the WSJ. - read WSJ's tax probe article (sub. req.) and patent box post
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Having taken candidates for oncology and anti-inflammatory indications to mid-stage trials, Israeli biotech VBL Therapeutics is planning an IPO to fund its push towards commercialization. The Nasdaq listing could give the company $75 million (€55 million), a sum it estimates will be enough to gather data for a BLA of its recurrent glioblastoma candidate.
|VBL Therapeutics CEO Dror Harats|
VBL--formerly known as Vascular Biogenics--is already recruiting sites and investigators for a Phase III trial of the drug and talking to the FDA about the design of the study. If everything goes according to plan, VBL will start the trial by the first quarter of 2015 and have the data it needs for a BLA in the second half of 2017. The plan is predicated on the FDA agreeing to accept data from a single pivotal trial, and VBL is in the middle of discussing this and other terms with the regulator.
Bigger competitors are also targeting the glioblastoma market, with AbbVie ($ABBV) presenting positive Phase I data at ASCO last month and Roche's ($RHHBY) Avastin already approved for use in patients who have progressed after prior treatment. VBL is investigating the use of its drug in conjunction with Avastin in an open-label Phase II trial. Both drugs are anti-angiogenic agents, and their similarities have influenced which other indications VBL is targeting.
The glioblastoma candidate is also in Phase II trials in patients with thyroid and ovarian cancer, the latter of which was initiated in part because Avastin improved progression-free survival for some high-risk, advanced cases. VBL estimates the IPO will give it enough cash to finish the ongoing mid-stage studies. While this gives VBL several other shots on goal should the Phase III glioblastoma trial flop, revenues from these indications are still many years away.
VBL has already experienced disappointing trial data, with its lead anti-inflammatory candidate missing its primary endpoint in a Phase II study in psoriasis patients. A second Phase II trial in 194 patients with moderate to severe psoriasis is already underway, with VBL hoping the publication of data in 2015 will add credence to its belief that the failure of the previous study was due to the short treatment duration and low dosing levels.
Other anti-inflammatory candidates are on the verge of entering the clinic, with VBL viewing its strategy of developing immune modulators that are structurally and functionally similar to naturally occurring molecules as a winner. VBL began focusing on the oncology and anti-inflammatory platforms after deciding the deep vein thrombosis treatment it started off developing was beyond its capabilities as a startup, Globes reports. - read the F-1 and Globes article
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Since setting up shop in 2007, Selvita has struck partnerships with H3 Bioscience and Merck KGaA, built a 195-person workforce and taken a handful of drugs through the first steps of preclinical research. Now the Polish biotech has secured cash to run final preclinical tests on its two most advanced oncology programs, the most promising candidate from which will move into Phase I.
|Selvita CEO Pawel Przewiezlikowski|
Moving a drug into the clinic will represent a notable milestone for the Polish biotech sector and specifically Selvita, which has made its name servicing other companies but is now stepping up its in-house activities. The National Centre for Research and Development is partly financing the push into the clinic, with its contribution meaning Selvita will only have to chip in PLN 11.5 ($3.8 million) of the project's forecast cost of PLN 20.9 million.
The outlay will allow Selvita to gauge which of the preclinical oncology candidates from its two lead programs has the best chance of succeeding in humans. SEL24 looked for a dual kinase inhibitor targeting PIM and FLT3 mutants, both of which are linked to the development of acute myeloid leukaemia and lymphomas. The second project, SEL120, is primarily researching drugs for colorectal cancer, but Selvita thinks the work has implications for other tumors associated with CDK8.
Selvita has identified clinical candidates from both programs. The biotech is now running toxicology studies and advanced preclinical efficacy tests on the candidates, at the end of which it will know which it is taking into the clinic. Selvita has previously said it plans to start its first clinical trial in 2015. This timeline sets up an important 18 months for the young biotech, with the company also planning to list on the main market of the Warsaw Stock Exchange in the fourth quarter. - read the release
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When Merck KGaA rejigged its R&D operations in a bid to boost its pipeline last year, it tried to strengthen its hand in the hot immuno-oncology sector by setting up a unit dedicated to the field. Now Merck KGaA has moved to bolster the group's preclinical assets by striking a deal with German biotech MorphoSys (FSE:MOR).
|MorphoSys CEO Simon Moroney|
MorphoSys will apply its Ylanthia antibody phage library and technology platform to the alliance, just as it is doing in the partnership it formed with The Moulder Center for Drug Discovery Research in April. Both deals are focused on discovering therapeutic antibodies, but while the Moulder alliance gives MorphoSys the option to develop clinical candidates, the more recent arrangement puts Merck KGaA in charge of any drugs that make it as far as Phase I. MorphoSys will co-fund R&D--receiving milestone payments along the way--but can opt out of financing each drug at certain stages.
Exactly when MorphoSys pulls the plug on its financial backing of a candidate will dictate the royalty rate it will receive should the drug make it to commercialization. If a drug makes it all the way to market, Merck KGaA will take sole responsibility for selling the product and pay MorphoSys commercial milestones. Getting that far would be a boon for Merck KGaA and its nascent immuno-oncology unit, which has four drugs in the clinic. Merck KGaA also claims it has a "robust" preclinical pipeline, but details are scarce. Some of these candidates need to show promise if Merck KGaA is to find a place in the sector.
While Merck KGaA has a monoclonal antibody targeting PD-L1 in Phase I, it has made less of a splash than similar drugs from Roche's ($RHHBY) Genentech and AstraZeneca ($AZN). Genentech grabbed headlines at ASCO late last month by showing that its drug shrank tumors in 43% of bladder cancer patients in a Phase I trial. And AstraZeneca has already moved its PD-L1 drug into a Phase III lung cancer trial. Merck KGaA's drug could ultimately outperform all its rivals--or find a role being used in combination--but the data shown so far have focused on safety and dosing. - read the story
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It is now more than two years since Synairgen (LSE:SNG) posted Phase II data on its asthma drug and signaled its intent to find a partner for the program. Over that time multiple companies took a close look at the drug, but none pulled the trigger on a deal. That changed this week when AstraZeneca ($AZN) struck a deal worth $232 million (€172 million) biobucks and sent Synairgen's stock soaring.
|Synairgen CEO Richard Marsden|
Synairgen published Phase II data in April 2012, confirmed it had opened talks with potential partners in August of that year and reported that multiple parties were making detailed assessments of the drug in February 2013. Those talks have now finally led to a deal, with AstraZeneca paying $7.25 million upfront and committing to a further $225 million in milestones to license the drug, SNG001. Synairgen CEO Richard Marsden attributed the time taken to find a partner to an exhaustive due diligence process.
"We have spoken to all the major players in respiratory. We knew AstraZeneca was the ideal partner very early in the process. We … were working with them for months on this deal. They have done so much due diligence and technical work, because [SNG001] is so novel and unprecedented," Marsden told BioWorld. Having inked the deal, AstraZeneca plans to start a Phase IIa trial in patients with severe asthma early next year.
The Phase IIa trial will follow on from Synairgen's original mid-phase study, which assessed the use of SNG001 in 134 adults with asthma of varying degrees of severity. While the trial missed its primary endpoint in the overall population, a preplanned analysis of patients with hard-to-treat asthma--who comprised almost half of the study--found statistically significant improvements. The number of severe asthmatics experiencing moderate exacerbations fell 65% in the treatment arm. AstraZeneca viewed the data as compelling enough to add SNG001 to its respiratory portfolio.
Growth of the portfolio is central to AstraZeneca's plans, with management tipping respiratory to be an $8-billion-a-year business by 2023. AstraZeneca made the forecast as part of its defence against Pfizer. Now, with the deal seemingly dead, management has to deliver on its ambitious plans, and SNG001 is part of its strategy. For Synairgen, the benefits of the deal are more immediate, with its share price jumping 40% on the morning of the news. - read the story and BioWorld's take
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Dutch biotech arGEN-X plans to list on the Brussels stock exchange by next month. CEO Tim Van Hauwermeiren told FierceBiotech: "This is not an IPO out of necessity. This is an IPO out of opportunity." FierceBiotech | Reuters
French microbiome specialist Enterome Bioscience agreed to run a 100-patient clinical study with Synthetic Biologics ($SYN) to assess the effect of beta-lactam antibiotics on gut bacteria. Rockville, Maryland-based Synthetic Biologics hopes the work will lead to bacterial biomarkers it can use as diagnostics. Release
Novo Nordisk ($NVO) plans to add 6,000 extra staff in its home country of Denmark by 2022, with half of the new hires set to join its R&D team. Release
Israeli biotech OphthaliX dropped development of its oral A3 adenosine receptor agonist, CF101, for dry eye syndrome. The decision follows underwhelming clinical data. OphthaliX is also testing CF101 in glaucoma patients. The biotech recently amended the protocol for the Phase II glaucoma trial in light of data its parent company, Can-Fite BioPharma ($CANF), generated in a Phase II/III study of the drug in psoriasis patients. Release
Trianta Immunotherapies won a grant to further development of its immunotherapy platform. The grant will fund 40% of the project, with German biotech Medigene (ETR:MDG1)--which bought Trianta earlier this year--providing the rest. Release
Bristol-Myers Squibb ($BMY) named Johanna Mercier as its general manager for the United Kingdom and Ireland. Mercier replaces Amadou Diarra, who has moved to BMS' global policy and government affairs team. Pharmafile
Denmark's ALK (OMX:ALK B) confirmed it is preparing to file a European marketing application for its oral house dust mite immunotherapy, with the submission scheduled for the second half of 2014. ALK provided the update after publishing additional data from two Phase III trials, both of which met their primary endpoints and reported initial results last year. Merck ($MRK) is currently recruiting patients for its own Phase III trial of the drug. Release
Israel awarded Teva ($TEVA) the franchise for a pharmaceuticals and medical devices incubator, Globes reports. In a separate development, Teva's CFO said he is looking for small U.S. acquisitions. Globes | More
MGB Biopharma received a £1.3 million ($2.2 million) grant from the United Kingdom's Technology Strategy Board. MGB will put the cash towards a Phase I trial of its Clostridium difficile drug, MGB-BP-3. Release
Switzerland's EffRx Pharmaceuticals and Norway's Nordic Nanovector received orphan designations for their drugs. The FDA awarded EffRx the designation for its pediatric polycystic ovary syndrome drug, which is set to enter the clinic later this year, while European regulators granted the status to Nordic Nanovector's follicular lymphoma candidate, Betalutin. EffRx | Nordic
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Read previous editions of the EuroBiotech Report here.