Dainippon Sumitomo places big bet on cancer stem cell approach

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Looking to replace more than $1bn worth of 2011 sales for drugs that have already lost market exclusivity or are about to, Dainippon Sumitomo Pharma is taking a big bet on an as-yet unproven approach to cancer therapy. For $200m and up to $2.43bn in future payouts, the Japanese group is buying privately held Boston Biotech for its two novel products targeting cancer stem cells.

Whilst it remains a company heavily reliant on sales of CNS drugs such as the recently launched schizophrenia product Latuda, executives have designated cancer as a specialty area into which Dainippon would like to expand. The partnership established in April 2011 with Boston Biotech certainly allowed it a long look at the technology, which attacks tumour development and recurrence; a full takeout expresses belief in its promise.

Lucrative spinout

Boston Biotech is a spinout of the discovery arm of ArQule, initially funded in 2007 with a $5m contract to continue testing candidates from ArQule's drug portfolio. Although it has never formally announced a fundraising, it has received financial backing from Mitsui Global Investment and Alexandria Real Estate Equities, along with nearly $1.5m in National Institutes of Health grants to develop its RNA interference (RNAi) technology.

The target is cancer stem cells, or those cells that have the ability to self-renew and become cancer cells, a trait linked to resistance to current therapies. The Boston Biotech technology, the molecular targets of which have not been disclosed, inhibit several cancer stem cell pathways as well as heterogeneous cancer cells.

So far, BBI608, which Dainippon optioned for $15m in April 2011, has passed through phase II trials as a monotherapy for colorectal cancer and is in mid-stage trial as a combination therapy for colorectal, gastric and ovarian cancers as well as melanoma. BBI608 is set to enter phase III trials this year. A second candidate, BBI503, is in phase I as a monotherapy for advanced solid tumours.

With the option, Dainippon has had an opportunity to review trial results and was clearly confident that the Boston Biomedical studies, results of which again have not been disclosed publicly, were sufficient to give investors of the Massachusetts company the rather healthy exit announced yesterday.

Strategic boost

Dainippon is in need of a little bit of a pipeline boost, although Boston Biomedical’s assets are not likely to bring it any immediate relief; BBI608 is not forecast to launch until 2015. Its chief strategic problem stems from its presence in crowded and increasingly risky fields such as CNS and respiratory care, without the pipeline in the lucrative spaces of oncology and orphan diseases that have proven fruitful in recent years.

Launching Latuda last year was a significant event – as its biggest growth driver the drug is forecast to sell $696m in 2016 in the non-EU markets where Dainippon holds rights. Its biggest seller Lunesta loses patent protection in 2013 and other big sellers Xonepex and Amlodin have already gone.

Thus the current period is a fallow one – EvaluatePharma estimates show prescription drug sales flat to shrinking through 2016, hovering around the $3.7bn mark. As analysts from Citigroup write, it will be difficult to overcome short-term revenue challenges, although an announcement that it has cut sales representatives in the US may be a sign of its near-term streategy.

With this transaction, Dainippon is signalling its has given some thoughts beyond that period, even if the product is still risky.

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