Welcome to the latest edition of our weekly EuroBiotech Report. We lead this week on news that Neil Woodford's much-discussed fund is starting to take shape, with a $50 million (€36.8 million) investment in Elan-spinoff Prothena ($PRTA) among its first batch of positions. Woodford has also added some old favorites from his days at Invesco Perpetual, namely e-Therapeutics (LSE:ETX) and ReNeuron (LSE:RENE). Invesco offloaded stakes in both companies, but kept its position in another of the biopharmas making headlines this week: Shire ($SHPG). Having rejected an offer from AbbVie ($ABBV), Shire took a few pages out of AstraZeneca's ($AZN) playbook in making its case for independence. Shire lacks all the defensive strategies that were available to AstraZeneca, though. With 60% of its workforce based in the U.S. and little R&D left in the U.K., Shire is unlikely to receive the sort of political protection AstraZeneca enjoyed. Buying to get bigger is still an option for Shire, but one possible target took itself off the block this week. ThromboGenics (EBR:THR) is no longer for sale. Santhera Pharmaceuticals (SIX:SANN) is open to a deal though, with the Swiss biotech's CEO telling Bloomberg it would consider any formal bids. None have arrived yet, but analysts are touting Shire as a possible buyer. French biopharmas Innate Pharma (EPA:IPH) and Genfit (EPA:GNFT) are on the ever-shrinking list of companies not linked to a takeout by Shire. Both added cash to their coffers though, with institutional investors pumping around €50 million into each firm. And more. -- Nick Taylor (email | Twitter)
1. Woodford makes $50M Prothena investment as new fund takes shape
2. Shire's U.S. focus rules out use of 'British gem' defense against AbbVie
3. French biotechs raise €100M to hit the gas on clinical pipelines
4. ThromboGenics' stock hits 5-year low after it ends hunt for buyer
5. Santhera seeks U.S. licensing deal to continue 2014 recovery
And more >>
Neil Woodford's new fund started trading last week and the man Bloomberg dubbed the "savior" of biotech in the United Kingdom has already taken an interest in drug development stocks. Ireland-headquartered biotech Prothena ($PRTA) is an early target, with Woodford committing to buying around half of a new $100 million (€73 million) offering of ordinary shares.
|Neil Woodford--Courtesy of Invesco|
Prothena spun off from Elan in December 2012, snagging monoclonal antibody assets, a San Francisco-based R&D team and $125 million from its former parent company to get itself started. In December the biotech struck a $600 million biobuck deal with Roche ($RHHBY) to co-develop antibodies against Parkinson's, but in recent months Phase I data on its in-house treatment for amyloidosis and persistent organ dysfunction has dampened investor enthusiasm. The last data dump caused Prothena's stock to drop almost 42% in two days.
Despite the setback--or perhaps because of the fall in share price it caused--Woodford sees value in the company. Prothena has begun an offering of 4.75 million ordinary shares valued at around $100 million, with Woodford Investment Management (WIM) agreeing to buy a little less than half the stock. Prothena is already relatively cash rich by biotech standards, with the initial investment from Elan and subsequent $45 million in upfront and milestone payments from Roche leaving it with $195.1 million at the end of the first quarter.
Prothena will use the cash to fund clinical trials of PRX003--a drug it is developing for cancer and inflammatory diseases--and other R&D activities. Phase I trials of PRX003 are due to start next year. The drug builds on cell adhesion work done by Elan in the discovery and development of Tysabri. By blocking certain adhesion processes--which allow cells to stick to blood vessel walls and spread into tissues--Prothena thinks it can tackle a variety of diseases. Rheumatoid arthritis, psoriasis, multiple sclerosis and metastatic cancers have all been linked to the adhesion molecule targeted by Prothena.
Woodford has selected local, familiar firms as the other early biotech additions to his new fund. CityWire reports WIM bought stakes in British biotechs ReNeuron (LSE:RENE) and e-Therapeutics (LSE:ETX), both of which were part of the Invesco Perpetual funds Woodford left to set up his new venture. On the day Woodford bought a 14.9% stake in ReNeuron for £7 million and a 17.7% slice of e-Therapeutics for £5 million, his former Invesco fund sold similarly-sized holdings in both firms. - read Prothena's prospectus and the CityWire news
Back to top
At first glance AbbVie's ($ABBV) move to buy Shire ($SHPG) for $46.5 billion (€34.2 billion) could look destined to provoke the sort of political backlash in Britain that dogged Pfizer's ($PFE) pursuit of AstraZeneca ($AZN). Yet while opponents of the Pfizer deal painted AstraZeneca--an Anglo-Swedish company with a French CEO and many U.S. investors--as a British gem, even they may struggle to make a case for Shire.
|Shire CEO Flemming Ornskov|
The biopharma has its roots in the United Kingdom and is listed on the London Stock Exchange, but in many respects it has stronger links to the U.S. than Britain. Around 10% of Shire's staff are based in the U.K.. The 3,000 people Shire employs in the U.S. account for around 60% of its total headcount. On numbers alone Shire looks more like an American biopharma and the likelihood of it being used as a political football is further diminished by the types of jobs it keeps in the U.K.. Shire moved its headquarters to tax-friendly Ireland--where 5% of its staff work--in 2008 and has offshored R&D.
While AstraZeneca could point to its construction of a new R&D hub in Cambridge as evidence of its commitment to innovation in Britain, Shire's U.K. workforce is skewed towards office roles. "Political issues would be limited as the majority of U.K. employees are administration, business development or corporate functions," Jefferies analyst Peter Welford told Bloomberg. The loss of 500 office jobs would be damaging for individuals and the local community, but unlikely to spark national outcry on the same scale as the spectre of Pfizer laying waste to AstraZeneca's R&D assets.
Shire detailed plans to cut its U.K. operations late last year, with around 180 jobs at its Basingstoke site threatened by the decision to drop some rare disease programs. R&D jobs bore the brunt of the cuts, with Bloomberg reporting at the time that the cuts would lead to a "significant decrease" in the amount of drug development done at the site. - read the Bloomberg article
Back to top
French biotechs Innate Pharma (EPA:IPH) and Genfit (EPA:GNFT) are both ready to hit the gas on their clinical development programs having each snagged around €50 million ($68 million) from investors. In both cases the cash injection will allow the biotechs to push ahead with mid-stage trials and on toward pivotal Phase III studies.
Lille-based Genfit raised €49.7 million from institutional investors, giving it the cash to complete a Phase IIb study of its nonalcoholic steatohepatitis (NASH) candidate, GFT505, and prepare for Phase III. NASH has become a hot field, with The New York Times running a front page feature on the disease last month and Intercept Pharmaceuticals ($ICPT) seeing its stock increase 500% in two days in January on the back of Phase II data. Having ridden the wave of investor interest in NASH--Genfit's stock is up 192% this year--the French biotech has cashed in with a private placement of new shares.
|Pierre-Olivier Goineau--Courtesy of Erytech Pharma|
The placement attracted U.S.-based investors, a group Genfit courted at the J.P. Morgan Healthcare Conference earlier this year. Other French biotechs have also identified the U.S. as a source of capital, with 18 companies traveling to New York this week on a fundraising drive. The trip shows that while French investors have backed biotech IPOs, the country's lack of specialized funds is still an issue. "We've done successful IPOs without the Americans, but if you want to go further they are a boost that gives confidence," France Biotech chief Pierre-Olivier Goineau told Reuters.
French drug developer Innate Pharma has also targeted U.S. investors in the past--raising €20 million from that community last year--and has now added a further €50 million from institutional investors. The Marseille-based biopharma will use the cash boost to five run Phase II trials of its NKG2A checkpoint inhibitor, IPH2201. Innate Pharma bought IPH2201 for €2 million upfront, some shares and €20 million in biobucks from Novo Nordisk ($NVO), which ran a Phase I trial of the drug in patients with rheumatoid arthritis. - read Genfit's release and the Innate news
Back to top
In April ThromboGenics (EBR:THR) looked like a hot property, with Novartis ($NVS), Roche ($RHHBY) and Shire ($SHPG) all reportedly considering buying the Belgian biotech at that time. Fast forward two months and the situation looks very different. ThromboGenics has ended its search for a buyer, and sent its stock into a tailspin in the process.
|ThromboGenics' CEO Patrik De Haes|
The week began with ThromboGenics' stock sliding amid rumors it had decided to remain an independent company. On Tuesday ThromboGenics confirmed the rumors in a statement that also revealed CFO Chris Buyse will resign at the end of June. The market response was swift and brutal, with ThromboGenics' stock falling more than 30% in one day before bottoming out at its lowest point in five years.
If ThromboGenics is to recover it must improve the performance of its once hotly-tipped eye drug Jetrea in the U.S. And while the biotech has decided to stay independent, it knows it needs help with this task. ThromboGenics is pushing ahead with its search for a partner with the marketing clout to turn Jetrea into a success in the U.S., but observers have doubts about its ability to strike a good deal.
"It was clear that plan A was to sell the company. They didn't and they are in a very weak negotiating position. The only positive is that they realise they need a partner in the U.S., but that partner will need a significant discount," Reuters quotes KBC Securities analyst Jan De Kerpel as having said. ThromboGenics spokesperson Wouter Piepers played down the significance of the event, telling Bloomberg a buyout was just "one of the options on the table." - read Reuters' article, Bloomberg's piece and FiercePharma's coverage
Back to top
Having ended 2013 with CHF 5 million ($5.6 million) in cash and its stock down 97% from its post-IPO highs, 2014 looked set to be another tough year for Santhera Pharmaceuticals (SIX:SANN). However, with a series of positive events lifting its stock out of a slump that began in 2010, the Swiss biotech is being touted as a potential takeover target and is seeking a partner in the U.S..
|Santhera CEO Thomas Meier--Courtesy of Treat-NMD|
Santhera CEO Thomas Meier discussed the search for a U.S. licensing partner for the company's lead drug in an interview with Bloomberg. The drug--known as Catena in North America and Raxone in Europe--is being developed for three indications: Leber's hereditary optic neuropathy (LHON), Duchenne muscular dystrophy (DMD) and primary progressive multiple sclerosis. At the end of 2013 a EMA knockback in LHON and the regulatory travails of DMD rivals Prosensa Therapeutics ($RNA) and Sarepta Therapeutics ($SRPT) made two of these indications look like shaky propositions.
Since then though the FDA has committed to at least hearing Prosensa and Sarepta's cases, Santhera has posted positive Phase III DMD data and EMA has begun reviewing a second LHON application. In the wake of the wave of positive news, Santhera is hoping to find a U.S. partner for each indication, with the upfront payment part-funding marketing in Germany, Switzerland, Austria and France. Untapped markets await. "There are no effective therapies available in major markets for the indications of Raxone, so the company will have a monopoly," Helvea analyst Olav Zilian told Bloomberg.
Prosensa and Sarepta could both pip Santhera to the DMD market though, and the likes of French nonprofit biotech Genethon and U.S.-based Biovista are giving chase in LHON. Even if Santhera wins approval ahead of its rivals, it could struggle to grow sales. Zilian thinks this scenario could be prevented if Santhera courted a buyout from a rare disease specialist like Actelion (SIX:ATLN) or Shire ($SHPG). Santhera isn't ruling anything out. "If there is formal interest, we will have to take a look at it, it's an option we have to consider," Meier said. - read the Bloomberg article
Back to top
The European Commission warned Ireland it may expand its tax investigation beyond Apple ($AAPL), potentially putting biopharma companies that set up in the country to take advantage of the low rates in its crosshairs. An anonymous source told Reuters that if Ireland "does not fix the problem" the Commission will start targeting other companies. Reuters
MacroCure became the latest Israeli biotech to file its papers for a Nasdaq IPO. The cell therapy company hopes to raise $75 million (€55 million) to fund a late-phase trial of its wound care candidate and set up a manufacturing plant in the U.S. Bloomberg
Bone Therapeutics enrolled the first patient in a six-month Phase I/IIa trial of its bone forming product to treat delayed union fracture. The Belgian biotech claims it is the first ever clinical trial of an allogeneic bone cell therapy product. Release
Israel's BioLineRx in-licensed a neuropathic pain candidate from the University of Colorado. The small molecule boosted the effects of morphine in rats. Release
Shares in Basilea Pharmaceutica (SIX:BSLN) slumped after FDA told the Swiss drugmaker it will need more Phase III data to win approval for its pneumonia drug. FDA wants data on community and hospital-acquired pneumonia, The Wall Street Journal reported. Basilea hopes to find a partner to fund the work. The company also moved an oncology candidate into Phase IIa. WSJ I FierceBiotech I Release
Spain's Grifols is running an internal investigation into potential violations of the Foreign Corrupt Practices Act in parts of Europe, the Middle East and South America, Compliance Week reported. Operations in Belarus and Russia are the primary focus of the investigation. Compliance Week
Novo Nordisk ($NVO) predicted it will double its sales within the next 10 years. The Danish drugmaker based its bullish forecast on a belief that more and more diabetics will use its products. FiercePharma I Reuters
Novartis ($NVS) and Roche ($RHHBY) ranked high on the list of Swiss companies with the biggest pay gaps between top executives and the lowest-paid employees. Top earners at both companies bring in at least 200 times more than staff on the bottom rung of the pay ladder. FiercePharma I Bloomberg
Finland-based Orion struck an option agreement with Indian biotech Aurigene for BET inhibitors. Aurigene will receive an upfront payment, licensing fee, milestones and royalties if Orion picks up a candidate from the BET program. Release
Prosensa ($RNA) completed enrollment in the natural history study of Duchenne muscular dystrophy (DMD). The biotech began the trial in 2012 and now views it as a confirmatory program that could help when its lead candidate, drisapersen, goes to FDA for review later this year. Release
4d Pharma (LSE:DDDD) made new ordinary shares available in an attempt to raise £21.5 million ($36.5 million). The British biotech will use the cash to advance Thetanix and Rosburix, both of which are being developed by GT Biologics, a drug developer in which 4d Pharma owns an 83.5% stake. Release
The European Medicines Agency classed Cellectis' UCART19 as an advanced-therapy medicinal product, causing the French biotech's stock to rise yet again. The 10% jump that followed the news came one week after a deal with Pfizer ($PFE) sent Cellectis' stock soaring. Release
Back to top
Read previous editions of the EuroBiotech Report here.