Wednesday, January 10, 2007

Curious deal....(Amphora to Genentech)

Amphora sold an oncology lead to DNA for an undisclosed amount. (Amphora's pipeline here.) The target was undisclosed, except that it is active in multiple indications. (One intriguing prospect is Amphora's "AA-GFR", a combo VEGF+EGFR drug.)

Assuming the undisclosed sale price was driven by just one strong buyer (instead of an auction), I'm led to wonder 1). why an outright sale from Amphora's perspective? 2) why an outright purchase by DNA? and 3) what does Amphora have that DNA doesn't? 4) what does this mean for other small biotechs?

Outright sales are rare - I can't find too many other examples of a company selling a lead outright (some exceptions are companies closing up, like Triad's p38 program sale to Novartis.) From Amphora's perspective why sell outright if there's a chance at long term value (royalties or milestones?) One reason might be a need for $$$ to support their numerous other programs, or, perhaps DNA made them an 'offer they couldn't refuse.'

From DNA's perspective, why buy when you can license which would reduce near term risk, not to mention address the implicit message that the lead can't be that good (otherwise, why would Amphora sell?)? One reason you buy: if you don't want to commit to any long term development of the program purchased. This might especially make sense if DNA is shepharding multiple leads to a target thru a competitive development.

No matter which of the above is the case, it's a safe bet that there isn't enough (any?) compelling data on the program sold to DNA, otherwise DNA would manage the financial risk and impact thru a license, and Amphora would want to be rewarded by clinical success.

One might guess that DNA purchased with the intent to 'flip' the lead, but that would be greatly out of character for DNA. Another guess here is that the leads are so early, but Amphora so wanted a partner, that the only deal that was worth DNA's time was a sale. (Or, in a slight twist, Amphora wanted to maximize short term cash inflow, but why didn't that scare off DNA?)

Is DNA doing some bargain shopping? Are they buying a piece of data that in DNA's make/buy calculations seems cheaper thru Amphora?

Ultimately, in a twist of biotech logic, the LEAST risky deal for DNA would be a purchase, as no future commitment is created.

My guess is that Amphora needs cash badly (I didn't see any press releases detailing VC), and the validation of a transaction with DNA, while DNA saw a program sufficiently novel enough to spend some pocket change on.

What this means to small biotech is:

1) You CAN sell lead programs to the best biotechs to fund other priorities, but you'd better not expect much $$$ in return.

2) Either: in this seller's market, no deal form is out of the question OR: DNA is using it's buyer's leverage to drive very favorable deals. (My guess is the former.)

3) DNA is diversifying it's pipeline not just by indication or target, but also deal type. This is the sort of thing a 'lead dog' can do with great confidence (versus the competition playing catch-up.) This suggests a lot of faith by DNA in future corporate growth.

Plus 1 'perhaps': perhaps this deal indicates that not everyone believes in the industry models where an IND lead is worth (on average) $100M, as assuming the sales price was small, discounting this figure either suggests that DNA got a steal, or Amphora discounted the present value very, very far.

addendum: KinasePro think it's Amphora's Akt program that was sold.

1 comment:

Kinasepro said...

I think your overthinking this one!

DNA likes AKT (Rituxan) and wants in on the small molecule side.

Amphora's investor sheet is not that deep and the 'service' side of their business? Never heard of 'precisionscreen' so it's likely they need cash. The 'discovery' part of their pipeline just means they have a screen up and running and a couple libraries, but they also put a fair amound of effort into p38 which isn't likely very valuable.