Welcome to the latest edition of our weekly EuroBiotech Report. While no politicians are rushing to Shire's ($SHPG) rescue as it attempts to fend off AbbVie ($ABBV), lawmakers in the United Kingdom are readying their strategies for the next time they do decide to intervene. A fresh bid from Pfizer ($PFE) for AstraZeneca ($AZN) would spur them into action. And the government is confident it has the power to make it "dangerous" for Pfizer to go back on any promises. Having rebuffed Pfizer for now, AstraZeneca continues to build its R&D capabilities, with a deal between its virtual unit and the Max Planck Institute the latest step in its strategy. As the likes of AstraZeneca have moved away from big in-house campuses and towards a more externalized R&D model, sites like Sandwich and Alderley Park have come onto the market. The success of these and other science parks is central to Britain's R&D strategy, but some fear that the property developers that have been snapping up campuses are more interested in cost-cutting than innovation. Salix Pharmaceuticals ($SLXP) cited both as motivations for its merger with the Irish subsidiary of Italy's Cosmo Pharmaceuticals (SIX:COPN), but the increasingly well-trodden tax inversion path looks like a big factor in the deal. Israeli biotech BioBlast Pharma filed an amended, upsized F-1 ahead of a Nasdaq IPO. And more. Nick Taylor (email | Twitter)
1. U.K. to Pfizer: We're ready for you
2. AstraZeneca continues to cozy up to European academia with Max Planck deal
3. Role of ex-Big Pharma sites questioned as property companies snap up science parks
4. Israeli entrepreneurs target second IPO in 14 months as BioBlast upsizes F-1
5. Cosmo's Irish subsidiary merges with Salix in latest tax inversion deal
And more >>
A United Kingdom political committee met this week to discuss adding powers to block takeovers that harm British science, a proposal motivated by Pfizer's ($PFE) pursuit of AstraZeneca ($AZN). And while it will take time for any changes to happen, the government is doing what it can within the current legal boundaries to prepare for a fresh bid from Pfizer.
|U.K. Business Secretary Vince Cable|
Speaking at a House of Lords committee on takeover rules, U.K. Business Secretary Vince Cable said he is confident the government can negotiate and enforce promises from Pfizer if it makes a new bid for AstraZeneca, The Telegraph reports. While trying to woo AstraZeneca shareholders and U.K. politicians earlier this year, Pfizer made caveat-laden commitments to maintaining R&D capacity in Britain, but many feared the country would be powerless if the U.S. drugmaker began axing jobs after finalizing the deal.
Cable thinks the government has a bite to back up its bark, however, telling the committee it could use its existing powers to make it "dangerous and deleterious" for a company to backtrack on earlier promises. The business secretary has used the takeover rule-enforced lull in the Pfizer-AstraZeneca saga to draw up a strategy in preparation for renewed bidding once the cooling-off period ends in November. Exactly what is planned remains a secret, though. "I'd rather not divulge too much about how we are doing our scenario planning should this issue occur," Cable said.
While a potential takeover of AstraZeneca was the motivation for holding the committee meeting, the topic discussed has broader implications. The proposal is to extend the U.K.'s public-interest test for foreign takeovers to scientific research, giving a panel the power to block deals that would harm R&D. Only threats to media plurality, national security and financial stability are covered by the current law. - read the Telegraph article
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Assessments of Europe's biopharma R&D capabilities invariably talk up the strength of early-stage science at academic centers like the University of Oxford. This week AstraZeneca ($AZN) continued its strategy of tapping into this resource, striking a deal with Germany's Max Planck Institute (MPI) that builds on the model it established last year with the Karolinska Institutet.
|AstraZeneca CEO Pascal Soriot|
The partnership with MPI gives AstraZeneca a direct line to one of Europe's leading research institutes, with its scientists collaborating with their academic peers on cardiovascular and metabolic disease, particularly new modalities chemistry like stabilized peptides. AstraZeneca established the blueprint for the partnership last year when it teamed up with the Karolinska Institutet to create a Swedish research center focused on assessing drug targets for cardiovascular and metabolic diseases.
Both deals follow the virtual R&D model AstraZeneca created in a restructuring of its neuroscience operations in 2012. The restructuring formed iMed, a group that links AstraZeneca to a network of third-party collaborators and works to move drugs to proof of concept. Over the past two years, iMed has expanded into cardiovascular disease, oncology and autoimmune disorders. The cardiovascular iMed runs out of AstraZeneca's Mölndal, Sweden, site, which is one of its three main R&D centers.
By linking its R&D centers in Mölndal and Cambridge, England, to external teams, AstraZeneca hopes to hoover up good ideas and promising candidates from across Europe. Johnson & Johnson ($JNJ) has taken a similar approach with its much-praised J&J Innovation group. The unit set up an office in London last year and struck 16 deals with European academic institutes and biotechs. - read the release and FierceBiotech's take
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As Big Pharma companies have pulled out of research sites in the United Kingdom, authorities have looked to science parks filled with smaller companies to keep R&D going. But the health of this model is now being questioned, with the chairman of the U.K. Science Park Association warning that interest from property developers is shifting focus from nurturing innovation to cutting costs.
|Dr. David Hardman|
The chairman, Dr. David Hardman, made the comments to the Financial Times ahead of the U.K. Science Park Association's annual meeting. As it stands, around half the U.K.'s 100 science parks are owned by or affiliated to universities, with some others being run by local authorities. The rest are owned by property developers, a group that has identified science parks as an investment that can weather tough economic times. While the U.K. economy experienced a double-dip recession from 2008 to 2012, average annual take up at science parks was up 20% over the previous 8-year period.
Colliers International, the consultancy that compiled the data, called demand "surprisingly resilient," but Hardman is concerned by a shift in the identity and function of science parks. With property developers snapping up sites--the company that owns Pfizer's ($PFE) former Sandwich campus bought a research center from Unilever last week--Hardman fears companies are increasingly renting space from groups more interested in "facilitating savings" than encouraging innovation.
"This active management of innovation communities is also a key differentiator between our members and those running business and trade parks. Real estate is obviously important, but it is far from the sole driver of our success," Hardman said. The Innovation Birmingham Campus run by Hardman, for example, offers startups a support package that includes access to mentors, financing and resources. Ultimately, such incubators must show that their support makes them a better value than parks run by more hands-off property developers. - read the FT article
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When BioBlast Pharma filed its F-1 for a $37.5 million (€27.6 million) IPO back in February, the Nasdaq biotech index was a few weeks away from a two-month-long slump. With the index this month having returned to highs last seen in March, BioBlast--an Israeli rare-disease specialist co-founded by the team behind Alcobra ($ADHD)--has resubmitted its F-1 and upped the amount it is trying to raise.
The amended F-1 positions BioBlast to raise up to $46 million, a sum that will give it enough cash to complete a Phase III trial of its treatment for oculopharyngeal muscular dystrophy and still have $40 million left over. BioBlast is awaiting approval for the Phase III trial in the U.S. and Canada, after which it will begin administering its intravenous drug Cabaletta to patients with the genetic neuromuscular disease.
With $46 million in the bank, BioBlast will also have the resources to complete clinical development of Cabaletta in spinocerebellar ataxia type 3--also known as SCA3 or Machado-Joseph disease--and advance some of its preclinical candidates into midstage trials. For now though money is tight. BioBlast ended 2013 with $0.3 million in cash, but raised $5.3 million by selling shares in the first two months of this year.
Pulling off the IPO would give the biotech some financial flexibility and also represent a coup for the company's co-founders, Dr. Dalia Megiddo and Udi Gilboa. Megiddo and Gilboa also co-founded Alcobra, an Israeli biotech that raised $25 million in a Nasdaq IPO last year. Since its May 2013 IPO, Alcobra has raised a further $38 million in a secondary offering and seen its stock price increase by 155%. - read the amended F-1
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Cosmo's Irish subsidiary merges with Salix in latest tax inversion deal
Cosmo Pharmaceuticals (SIX:COPN) is an Italian drugmaker, with shares trading on the Swiss stock exchange and a pipeline of gastrointestinal drugs. But with tax inversions driving transatlantic M&A, Cosmo's Irish subsidiary is perhaps its standout feature and the target of interest from Salix Pharmaceuticals ($SLXP).
Raleigh, NC-based Salix is to merge with the Irish subsidiary in a move CEO Carolyn Logan expects to lower its tax rate from the "high 30's to the low 20's," The Street reports. Salix's press release put tax benefits at the bottom of its list of motivators for the deal, but analysts have been quick to pin the inversion as a driving force behind the merger. "This deal was not about generating near-term accretion but more about setting up a more favorable long-term tax structure," Leerink analyst Jason Gerberry wrote in a note to investors.
Cosmo will keep 20% of the subsidiary and gain greater access to Salix's gastrointestinal drug development and commercialization experience. Salix will acquire the U.S. patent for a Phase III travelers' diarrhea drug in development at Cosmo--plus claims to other candidates in a range of market--and have specific rights of negotiation on any other GI products that emerge from the Italian drugmaker's pipeline.
The pipeline was boosted this week by Valeant Pharmaceuticals' ($VRX) decision to return the rights to a Phase II acne drug, CB-03-01. Although Phase II data is already in, Jefferies & Co analyst Peter Welford reports that the timing of Valeant's decision means Cosmo won't receive a €20 million ($27 million) milestone linked to the trial. Even so, Welford views the return of the rights as a positive. "The company now has the financial capacity and potential expertise to pursue future development internally," Welford wrote in a note. - read The Street article, Reuters' coverage and the press release
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Neil Woodford revealed the top 10 investments of his new fund, with AstraZeneca ($AZN), GlaxoSmithKline ($GSK) and Roche ($RHHBY) all featuring. AstraZeneca and GlaxoSmithKline account for 8.3% and 7.1% of the total fund, respectively, making them Woodford's top two positions. Details of Woodford's investments in biotechs will emerge later this month when the full portfolio is revealed. Post
While the full list of Woodford's investments has yet to emerge, details continue to trickle out. The latest news is Woodford Investment Management bought 10% of the issued share capital in Abzena, the Cambridge-based R&D service provider that raised £20 million ($34 million) as part of its listing on AIM. Imperial Innovations and Invesco will remain the biggest shareholders after the listing. Release | More
Abzena will be joined on AIM by fellow British biopharma service provider Ergomed, which raised £11 million ($19 million) in an IPO. Ergomed will use some of the cash to buy its sister company, PrimeVigilance. LSE
The U.K. R&D service sector gained a major new entrant as private equity firm Equistone Partners helped roll up three companies into a $100 million (€73 million) business. The resulting company, Concept Life Sciences, is made up of Peakdale Molecular, Resource & Environmental Consultants and Scientific Analysis Laboratories. Financial Times | FierceCRO
Dutch biotech arGEN-X raised €40 million ($54.5 million) in its Brussels IPO, with Shire ($SHPG) picking up 9.1% of the offering. The company will use the cash to advance its in-house pipeline, which it is developing alongside projects with Shire and other partners. FierceBiotech
Biosceptre International raised AU$5 million (€3.4 million) from existing investors to move its lead candidate into the clinic. The Cambridge, England-headquartered oncology company has R&D operations in Sydney, Australia. Release
Israel's Biocancell Therapeutics (TASE:BICL) revealed plans to raise NIS 28.8 million ($8.2 million) in a rights issue. Major Biocancell shareholder Clal Biotechnology (TASE:CBI) committed to buying at least half of the shares issued by the cancer drug developer. Globes
Swedish leukemia specialist Cantargia raised SEK 20 million ($2.9 million) to finish off preclinical toxicology work. Cantargia is in talks with potential partners about further development of its candidate. Release
U.K.-based Domainex won a £1.4 million ($2.4 million) grant to move a chronic obstructive pulmonary disease candidate towards Phase I. The kinase inhibitor outperformed Forest Laboratories' ($FRX) Daliresp in preclinical tests run by Domainex. Release
Prosensa ($RNA) filed a mixed shelf registration to give itself the option to raise up to $150 million (€110 million). Release
Genmab received a $25 million (€18 million) milestone from Janssen Biotech after progress in a Phase III trial of a treatment for relapsed or refractory multiple myeloma. Release
The founder of BioVex described how he came to bank just $709 when Amgen ($AMGN) bought the company for $1 billion in upfront and milestone payments. David Latchman had a 25% stake in the British biotech when it was founded, but waves of investment diluted this down, leaving him with an insignificant share by the time of the buyout. THE
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Read previous editions of the EuroBiotech Report here.