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Impressive Deal by action pharma

The Danish biotech firm Action Pharma impressed the market in early May by selling a drug candidate to pharmaceutical company Abbott for 110 million USD, approximately 780 million Swedish crowns.

The drug candidate goes under the name of AP214 and is used to prevent acute kidney injury during cardiac surgery. The whole amount, 110 million usd, will be paid in cash and upfront, which in itself is unusual. Abbott gets total global rights to develop and commercialize the substance, not only against kidney damage after major thoracic surgery, but for all other indications as well.

“The process of selling AP214 started in November 2011 and we approached about 50-60 companies, both big pharma and smaller companies, thus we cast a wide net. The time-line was aggressive and in January 2012 we had indicative offers from more than a handful,” says Action Pharma’s ceo Ingelise Saunders.

“We choose Abbot partly because of the size of the payment and partly because it was all upfront, but also because they have the resources to develop AP214 against a broad line of indications which is important to us,” Ingelise Saunders states.

Primary research focus
AP214 is a melanocortin peptide agonist. It protects the kidneys during and after surgery via several mechanisms, since it targets both a potential systemic inflammatory process and apoptosis (cellular death) due to hypoxia. The effects are mediated through the melanocortin receptors 1 and 3. Positive phase IIb-data for AP214 was presented by Action Pharma in September 2011 and Abbott plans to initiate another phase II study later in 2012 and focus on dose planning. The deal should be viewed against the fact that Abbott is under pressur to come up with new drug candidates to strengthen the pipeline, the company has become more and more dependant on the anti-inflammatory drug Humira, a TNF-alpha inhibitor used to treat rheumatoid arthritis.
Saunders emphasizes that Action’s focus on what data a potential buyer wants to see has been a key-factor.

“In 2010 we decided to make another study of AP214 to increase the value in a future deal. During the planning of the study we had a great dialogue with the fda who gave us extremely important feedback regarding endpoints and design of the study. The interaction with the fda was carefully documented, which proved to be very important during the due diligence in this process,” says Ingelise Saunders. To reduce costs Action Pharma cut almost all staff; the only personnel on the payroll were the ceo and coo, the rest was out-licensed.

“This was a very tough decision at the time but in hindsight it was the right thing to do. We focused all our attention and all our resourses on AP214 and our investors backed us 100 percent on this,” says Ingelise Saunders.

Origins in Zealand Pharma
The Danish biotech company Action Pharma is located in Aarhus and was founded in 2000. It is privately owned and not noted on the stock market. Several venture capital firms have invested in Action,with SLS Invest, Innovationskapital and Sunstone capital among these. However, Action Pharma and its owners are not the sole winners from the deal. AP214 was originally developed by Danish biotech firm Zealand pharma, who sold it to Action pharma in 2003. As a consequence of the deal between Zealand and Action, Zealand will get ten percent of the amount paid by Abbott, around 11 million dollars (approximately 80 million Swedish crowns).
Zealand will also get a small (low single digit) share of the potential sales of AP214 from Abbott if the substance reaches the market. Action Pharma has developed drug candidates based on research of melanocortin-receptors through its sip-technology. The technology was in-licensed from Zealand Pharma. However, as a result of Abbotts purchase of AP214, Action pharma no longer has the right to continue development of new drug candidates based on the sip-technology. For the Scandinavian biotech sector the deal between Action Pharma and Abbott is clearly good news. After a number of spectacular setbacks it is vital that investors are presented with the potential rewards that await if companies succeed in out-licensing drugcandidates. g