Deals Re-Energize Biotech Sector

A run of positive clinical trials and lucrative financing deals is injecting fresh energy into the biotechnology industry, which has been hit particularly hard in the economic downturn.

In the latest development, scheduled to be announced Thursday, Exelixis Inc. of South San Francisco, Calif., is licensing two of its experimental cancer drugs to French pharmaceutical giant Sanofi-Aventis SA in a pact in which Exelixis will get an upfront payment of $140 million.

The news comes on the heels of Tuesday's report by MAP Pharmaceuticals Inc. that its experimental migraine-headache medicine achieved strongly positive results in a late-stage trial.

Also Tuesday, Amgen Inc. agreed to pay $50 million to exercise its option on a heart-failure drug being developed by Cytokinetics Inc. Last week, Johnson & Johnson said it agreed to pay $894 million for Cougar Biotechnology Inc., which has a promising prostate-cancer drug.

The positive signs for biotech include a secondary stock offering by Dendreon Inc., which raised $221 million after reporting positive late-stage data on prostate-cancer drug Provenge.

The flurry of activity follows months of doldrums in the biotech industry, largely reflecting woes in investment banking and the overall economy that all but sealed off access to financial markets -- especially for small companies without products on the market. Despite expectations that big pharmaceutical companies would go on a shopping spree for biotech properties, the drug giants -- with such pending deals as Pfizer Inc. buying Wyeth and Merck & Co. merging with Schering-Plough Corp. -- invested in acquiring each other instead.

"The process we've been going through has been painful for the small companies," says Jim Birchenough, a biotech analyst at Barclays Capital. The new developments "may be the beginning of a better environment for biotech overall," says the analyst, who recently upgraded his rating on the U.S. biotechnology sector to positive from neutral.

He sees companies such as Dendreon and Rigel Pharmaceuticals Inc., which has a drug for rheumatoid arthritis in development, as ripe for partnership agreements or acquisitions.

The Biotechnology Industry Organization, a trade group, says 40% of the 330 publicly traded biotech companies are operating with less than a year of cash in the bank. Many of them have limited prospects for raising enough money to get their best drug candidates through late-stage development to gain consideration by the U.S. Food and Drug Administration.

The initial public-offering market in the U.S. is tight. Since the beginning of 2008, there has been just one biotech IPO.

Exelixis has thrived by negotiating rights to several of its large pipeline of drug candidates in early to mid-stage development. In December, it signed a pact with Bristol-Myers Squibb Co. for two such drugs for an initial payment of $195 million and an additional $45 million due this year. It has since reached a smaller pact with Boehringer Ingleheim GmbH.

With the Sanofi deal, which includes an additional $21 million over the next three years, Exelixis will have raised more than $400 million through licensing deals since late last year. "We're in the best financial shape we've ever been in," says George A. Scangos, chief executive officer at Exelixis, which was founded in 1994.

Hundreds of millions in additional payments are possible if certain development milestones are met. Sanofi would sell the drugs if they reach the market, paying royalties to Exelixis.

The latest agreement focuses on two compounds, known as XL756 and XL147, that are in early- to mid-stage human studies. Both drugs block an enzyme called PI3 kinase, which is known to regulate a pathway involved in the growth of many types of solid tumors and is considered a promising new approach to fight cancer.

Exelixis has licensing pacts for eight cancer compounds, and it has three others in human testing on its own. None of its drugs has yet reached the market, but one is in late-stage development.

UPDATE 2-MAP Pharma migraine drug hits all goals in study

* 792-patient trial involved inhaled drug Levadex

* No drug-related serious adverse events, company says

* Shares more than double

(Adds details from study, CEO comments, shares)

NEW YORK, - MAP Pharmaceuticals Inc (MAPP.O) said on Tuesday its experimental orally inhaled migraine drug reached all four goals of a late-stage clinical study, and its shares more than doubled.

The drug, Levadex, showed statistical significance at two hours compared to placebo at relieving symptoms of migraine: pain, nausea, and sensitivity to light and sound.

Levadex, formerly called MAP0004, also reached secondary measures of the 792-patient trial, including sustained pain relief for 48 hours.

The trial results are a major boost for MAP, a small pharmaceutical company whose shares tumbled some 75 percent in February on a failed study for its experimental pediatric asthma drug.

"It really was all we were hoping for," MAP Chief Executive Tim Nelson said in an interview regarding the Levadex data. "We think we really hit the requirements that the patients consistently articulate they want for this disorder."

More than 29.5 million Americans suffer from migraines, an extremely painful often throbbing type of headache, according to the National Headache Foundation.

Levadex is an inhaled version of dihydroergotamine, an older drug used intravenously to treat migraines. Levadex is formulated to be used in MAP's proprietary inhaler, which is similar to a standard asthma inhaler except that patients breathe in to receive the drug rather than push on the device.

At two hours, 58.7 percent of patients on Levadex showed improved pain relief compared with 34.5 percent of patients on placebo.

Of the Levadex patients, 67.1 percent were nausea-free compared to 58.7 percent on a placebo. Some analysts had been concerned the product would fail to reach the nausea goal in the study. [ID:nBNG432342]

The company said there were no drug-related serious adverse events in the study.

At the request of the U.S. Food and Drug Administration, Mountain View, California-based MAP will conduct a second trial to confirm the results. 

Nelson said the company was still designing the second trial but that he expects it will not be as large as the first.

The company will consider a partnership with a larger pharmaceutical company to help market Levadex beyond pain specialists, Nelson said.

"If we could find the right partner for this product, we think that could help to bring this product to many, many more patients than we might be able to do ourselves," Nelson said.

MAP shares rose to $6.75 in premarket trading, up from their Friday close of $3.15 on Nasdaq. The shares traded at $11 in February, before the asthma drug setback. 

MAP PHARMACEUTICALS, INC.

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto included in Part I, Item 1 of this quarterly report on Form 10-Q and with the audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2008, as amended. Overview We use our proprietary inhalation technologies to enhance the therapeutic benefits and commercial attractiveness of proven drugs while minimizing risk by capitalizing on their known safety, efficacy and commercialization history. We have several proprietary product candidates in clinical development that address large market opportunities, including our two most advanced product candidates, Unit Dose Budesonide, or UDB, for the potential treatment of asthma in children and MAP0004 for the potential treatment of migraine. UDB is our proprietary nebulized version of budesonide intended to treat asthma in children from 12 months to eight years of age. UDB is designed to be administered more quickly and to provide efficacy at lower doses than conventional nebulized budesonide, which is the current leading nebulized treatment for asthma in children. MAP0004 is our proprietary orally inhaled version of dihydroergotamine intended to treat migraine. MAP0004 is designed to provide faster onset and longer lasting pain relief than triptans, the class of drugs most often prescribed for treating migraine. In December 2008, we entered into a worldwide collaboration with AstraZeneca AB, or AstraZeneca, to develop and commercialize UDB, which became effective on February 2, 2009. We are jointly developing UDB with AstraZeneca in the United States and have the rights to co-promote UDB in the United States. We announced positive results from Phase 2 clinical studies of UDB and MAP0004 in early 2007. We initiated a Phase 3 clinical program for UDB in January 2008, and in February 2009, we announced top-line results from our first Phase 3 trial of UDB, indicating that the trial did not meet its co-primary endpoints in the two doses evaluated when compared to placebo. We and our partner AstraZeneca are conducting further analyses of these data to determine appropriate next steps for the UDB program. For our MAP0004 migraine program we initiated a Phase 3 clinical program in July 2008 pursuant to a special protocol assessment, or SPA, from the U.S. Food and Drug Administration, or FDA. In order to obtain regulatory approval for UDB and MAP0004, we will need to conduct additional Phase 3 and Phase 2 clinical trials. We hold worldwide commercialization rights for MAP0004, and our goal is to market MAP0004 in the United States through our own focused sales force targeting neurologists and headache specialists. We may establish partnerships with pharmaceutical companies to market and sell to primary care physicians and outside of the United States. Our product portfolio also includes two earlier stage product candidates, both of which highlight the broad applicability of our technologies to a diverse range of potential future products. MAP0005 is our proprietary combination of an inhaled corticosteroid and a long-acting beta-agonist for the potential treatment of asthma and chronic obstructive pulmonary disease and MAP0001 is our proprietary form of insulin for the potential treatment of Type 1 and Type 2 diabetes via pulmonary delivery using our proprietary Tempo(R) inhaler. While we do not plan to make further significant direct investment in these two product candidates, we plan to evaluate other potential product candidates which may utilize these technologies, as well as partnership opportunities for further development and commercialization of these two product candidates. We are a development stage company and have not generated any product revenues. Since our inception, we have incurred losses and have an accumulated deficit of $185.8 million as of March 31, 2009. We have financed our operations through equity financing, debt financing, the issuance of convertible notes and collaboration payments. Prior to our IPO, in October 2007, we received net proceeds of $106.7 million from the issuance of convertible notes and convertible preferred stock. With the completion of our IPO we received net proceeds of $62.1 million after deducting expenses and underwriters' discounts and commissions. In 2006, we entered into a loan facility agreement and borrowed $10.0 million to finance working capital, or the 2006 Working Capital Loan, and a $1.0 million loan facility to finance equipment purchases. In May 2008, we entered into an agreement to borrow $20.0 million, or the 2008 Working Capital Loan, in order to repay the 2006 Working Capital Loan and to support general corporate purposes. We received $40.0 million as a nonrefundable upfront payment from AstraZeneca in February 2009.