Dollars for Donuts: Is the biggest deal for Big Pharma in 2009 the $80 billion deal struck by the brand name trade association PhRMA as its contribution to health care reform? We call it "Dollars for Donuts" because a key element of the deal is the industry's commitment to offer a 50% discount on drugs purchased by Medicare beneficiaries in the Part D coverage gap, a.k.a. the "donut hole" in the prescription drug benefit for seniors and the disabled. It's not a traditional biz dev opportunity, we admit. But if Big Pharma dealmaking is about anything, it is about paying up front for access to new commercial opportunities downstream. And this deal fits that model perfectly.(Read More)

Pfizer/Wyeth: This is the deal that marked the beginning of a new kind of Big Pharma. For better or for worse, it turns Pfizer from an R&D-focused, high-risk, high-reward company into a diversified, industrialized group whose investment appeal is less about growth than about dividends, efficiency and value. In its scale, the transaction symbolized the scope of Pfizer's--and other Big Pharma's--challenges, and in its content, it captured--in one fell swoop--many of the individual strategies drug firms are pursuing in order to escape from their R&D productivity problems.(Read More)

Pfizer/DOJ Bexxtra Settlement: Pfizer’s September settlement is by far the biggest in the wave of industry prosecutions that defined the decade of the 2000s. But these settlements have always been more important than the dollars. Each case—and the headlines it generates—marks another step down in the reputation of the industry. They have helped stoke a puritanical fire in the medical establishment, one that aims to root out all industry influence over clinical research, medical education, and clinical practice standards, a movement that could, taken to extremes, jeopardize the entire private sector biomedical model.(Read More)

Merck/Schering-Plough: Merck might've only been buying time through this deal--time to figure out what on Earth to do about a $4 billion patent-expiry problem--and will be doing the usual, un-prize-worthy cost-slashing (the deal's synergies represent a whopping 40% of sales). But what it lacks in headliners it makes up for, we argue, in behind-the-scenes cleverness.(Read More)

GSK/Pfizer ViiV Healthcare JV: It's not every day that Big Pharmas join forces in an important way. The HIV joint venture between Pfizer and GSK, announced in April, and later labeled ViiV, may be industry's biggest exception. The company combines GSK's and Pfizer's marketed HIV portfolios and pipelines into a standalone with more clout than either party would have individually, helping reduce both sides' cost, and infusing accountability and productivity in a way that only a smaller outfit can. Negotiating the terms wasn't easy, but if this tie-up works, it might not be the last. "If there's another opportunity to do the same thing again with GSK, we'd do it," said Bill Ringo, SVP BD at Pfizer.(Read More)

Roche/Genentech: With its landmark agreement with Genentech already nearing a sunset, Roche made a preemptive strike, betting it would gain more by owning 100% of sales juggernauts such as Avastin and the ability to slash duplicative infrastructure than it stood to lose if the top talent at Genentech hung up their lab coats. This tie-up isn't about innovation, it's about efficiency. And the acquisition's final price tag--$95-a-share, while certainly a great deal more than the intitial $89-a-share bid price, is more than matched by the likely earnings potential of Genentech's already marketed products. Furthermore, analysts estimate the biotech's mid- to late-stage pipeline more than adequately supplies Roche with a pipeline reservoir through 2016. (Read More)

Lundbeck/Ovation: Acquisitions with earn-out payments (a.k.a. CVRs) dominated the M&A scene, particularly early in 2009. Lundbeck's acquisition of Ovation boasted a biobucks figure of $900 million. No doubt there was a large down-payment ($600mm) but a substantial sum rested on the regulatory progress of Ovation's epilepsy drug Sabril. The CVR-boosted deal structure was established to allow Ovation and Lundbeck to share the risk associated with that approval. That drug was approved by FDA in August with a REMS to help mitigate the risk of peripheral blindness, a known side-effect of the drug. The REMS itself was well-anticipated given the rocky history of the drug (which Ovation licensed in from Aventis in 2004) and Sabril is now on the market--second line for epilepsy and first line for infantile spasms, a condition for which the drug has Orphan designation. (Read More)

Abbott/PanGenetics: Asset-focused funding of early-stage projects has fallen in and out of favor over the years, but the success of PanGenetics November deal with Abbott for its nerve growth factor antibody may draw imitators. In an interesting twist on company creation, the outfit was structured from the get-go as essentially two independent one-asset companies (NGF was one, the other is CD40), of which founder Index Ventures still owns 40% apiece. And so at first the Abbot/PanGenetics transaction looked like an oddly up-front-heavy licensing deal, but when Abbott paid $170 million up-front plus a potential $20 million milestone to access the biotech's PG110 Phase I anti-NGF project, it was in fact buying that company. The $170 million went straight to PanGenetics' investors; it won't be ploughed into the anti-CD40 mAB program. Nor will Abbott pay any downstream royalties to the biotech or its investors. (Read More)

Cephalon/Ception: Cephalon's option to buy Ception for $100 million upfront and another $250 million in milestones, with the purchase tied to the clinical performance of the start-up's Phase IIb/Phase III anti-interleukin-5 antibody, reslizumab, was the first of half a dozen or so option-to-buy deals in the past year. As we wrote at the time the deal was announced, the option-to-buy strategy is a clever way for Cephalon to acquire a potentially valuable large molecule platform while simultaneously capping the expenses it might owe down the road as it tries to build a pipeline of novel drugs to treat inflammatory diseases. (Read More)

Vertex Sells Telaprevir Milestones: In July Vertex announced that it would sell its future milestone payments associated with the filing, approval and launch of the HCV protease inhibitor telaprevir in Europe. Those milestones are owed (potentially, of course) by J&J, which licensed European rights to the HCV protease inhibitor from Vertex in 2006, and could total $250 million. The complicated, two transaction deal was just the latest move by Vertex in a series of ambitious financings that have raised hundreds of millions of dollars over the past two years. (Read More)

Movetis' IPO: Any company that gets an IPO done these days could be considered worthy of a DOTY nomination. Movetis' was the best of an admittedly small bunch, hauling in nearly €98 million. And what's more as of this writing the company is trading above its €12.25 per share offer price. Movetis spun out of J&J at the end of 2006 with about €60.8 million in Series A venture funding led by Sofinnova (pre IPO Sofinnova Partners held 22.5%, Sofinnova Ventures had 16%) and Life Science Partners (16.9%). At the time its lead asset, the newly-approved-in-Europe for a subset of constipation patients Resolor, was already in Phase III. (In exchange for pipeline, J&J held on to 21.2% of the company and received an upfront fee.) (Read More)

BMS/Mead Johnson Spin-Off: Bristol's two-part spin-off of nutritionals unit Mead Johnson is a creative and lucrative pair of deals that help the company boost cash flow and juice its earnings per share to keep rivals at bay while it deals with two large patent expiries and tries to employ its String of Pearls strategy to restock its pipeline. Structured as a stock-buyback, BMS is trading shares of Mead Johnson for its own stock in a tax-free transaction. The move capitalizes on the dramatic increase in MJN share price since Bristol IPO'd the unit in February. This latest--and probably last--move toward a biopharma focus at the expense of the diversification the rest of the industry seems so enamored by does sacrifice stability for short-term gain. But it might just help to secure the company's longer-term existence. (Read More)

Johnson & Johnson/Elan: Johnson & Johnson's July purchase of Elan's Alzheimer's immunotherapy program (AIP) via a stock purchase plan that gives the health care giant an 18.4% stake in the biotech. And the deal's complicated structure helps both J&J and Elan hedge against risk. In return for roughly $1 billion in capital (slightly less after Elan got into a tussle with BiogenIdec about a potential change of control to Tysabri), J&J is creating a new co focused on Alzheimer's immunotherapy, with a near-term focus on the interesting, but still very risky Phase III antibody bapineuzumab. Elan benefits because it doesn't have to fork over all the upside to its Alz program, given the biotech retains a 49.9% stake in the newco and also has a 49.9% share in its profits or losses. Elan also also gets significant help funding bapi's development with this deal. With J&J committing another $500 million to the antibody's Phase III trials that molecule will have to rack up $1 billion in costs before Elan has to pay another penny. (Read More)

GSK/Concert: GSK’s deal with Concert is representative of GSK's many option-alliances: flexible, low-cost, risk-mitigating, pay-for-performance-oriented and, frankly, we think just rather clever. It's also a very definite sign of the times. GSK paid $35 million up front (including $16.7 million in equity, another way to spread risk) for options on three projects, the most advanced of which started Phase Ib in November this year, the least advanced of which hadn’t even been selected at the time of the deal. GSK can opt into these programs at clinical proof-of-concept (or slightly earlier, at Phase I, for the lead). It’s risk-sharing deal content, too: Concert’s compounds are mostly deuterated versions of existing molecules, meaning it has replaced hydrogen atoms with deuterium atoms, creating new, patentable chemical entities that skirt existing IP and that may even be safer and/or more effective than the originals. (Read More)

Astellas/Medivation: With pipelines flagging and the general push to look outside, the hottest targets/assets/technologies are still commanding value in competitive auction arrangements. In October Medivation announced a tie-up with Astellas to develop its Phase III prostate cancer drug, MDV3100 in a transaction worth $110 million up-front and biobucks of more than $650 million. Moreover, Medivation still keeps significant control of the development program--at least in the US, where the two firms evenly split costs. (Ex-US, Astellas picks up the whole tab for development and commercialization, providing tiered double-digit royalties in exchange for the privilege.) Astellas was a particularly active dealmaker in 2009, this deal hits a hot oncology target, and was an early sign that dealmaking upfronts are on the way back up. (Read More)

GSK/UCB: The January deal in which GSK paid UCB $670 million for commercial operations in more than 50 non-core countries, as well as rights to sell some primary care drugs in those territories, captures so many of 2009's biggest trends: the land grab in emerging markets, the tug of regionalization versus globalization, the ongoing shake up in primary care, and diversification--the bluster of the big versus the commitment of the focused. On one level, the deal shows how two companies with very different strategies are reacting to the mania about emerging markets. GSK is looking to be a geographically diversified global provider of medicines at all price points to as many countries as possible—and says its far-flung infrastructure, deep pockets, and global expertise make it the go-to company for late-stage deal-making in emerging markets. UCB, on the other hand, is joining a small, but important group of biopharma that has chosen to intensify its focus rather than diversify. It recently repositioned itself as a spec pharma focused on CNS and inflammatory diseases and is extending that idea globally. (Read More)

Abbott/Solvay: Abbott's $6.6 billion acquisition of Solvay's pharmaceutical unit follows a pretty straightforward plot line, but the clincher to the story is this: Abbott is buying the Belgian drug unit with cash, most of which is coming from overseas. It's a smart use of those funds since repatriating it would subject it to a hefty 35% tax. And while multinationals sidestepped a withdrawal of the overseas tax deferral by the Administration earlier this year, some in the industry still think the axe could fall, next year when the budget review comes around. The drug maker also adds more than $3 billion to its top line and gains full control over the blockbuster TriCor/TriLipix dyslipidemia franchise, a business Abbott has big plans for, and the addition of Solvay's drug unit also extends Abbott's geographic footprint, adds a branded generics business and provides entry into vaccines. (Ooh, diversification.) (Read More)

Sanofi-Aventis/Regeneron: Biotechs often link their destinies to a Big Pharma big sibling, but few have gotten such sweet deals as Regeneron has with Sanofi-Aventis. Sanofi pays Regeneron $160 million a year in research funding through 2017 and can take over development of any antibody candidate at IND. Sanofi then funds clinical development, and if the candidates come to market, Regeneron splits profits (50/50 in the U.S., and a sliding scale from 65/35 to 55/45 in Sanofi's favor outside the U.S.). Regeneron reimburses Sanofi half the development costs from its share of the profits, which means no profits, no reimbursement. What's the catch? You tell us when you find one, at least from Regeneron's point of view. (Read More)