In a bid to strengthen its late-stage pipeline, Cephalon announced an agreement last week to acquire Gemin X Pharmaceuticals, a privately held biotech firm developing small molecules to treat cancer. Gemin X investors will initially receive $225 million in cash but could reap up to $300 million more if the company’s lead compounds reach the market.
Cephalon loses patent protection next year on its top-selling drug, the sleep disorder pill Provigil. In advance of the generics onslaught, the company has tried to encourage patients to switch to Nuvigil, a single-isomer version that was approved in 2007. But Nuvigil still significantly lags Provigil in sales, ringing up $186 million in 2010 compared with Provigil’s $1.1 billion.
As a result, Cephalon is trying to bolster its pipeline through deals like the one for Gemin X. The acquisition brings obatoclax, a pan-Bcl-2 inhibitor in Phase II trials to treat lung cancer, and GMX1777, an inhibitor of NAD+ synthesis in Phase I/II trials for melanoma. Other recent Cephalon purchases include Swiss generic drug firm Mepha, which brought a presence in emerging markets, and Ception Therapeutics, which added an asthma drug in Phase III studies.
The structure of the Gemin X deal is akin to a licensing agreement, combining a significant up-front fee with the promise of more money if drug candidates succeed. The model is increasingly being adopted by pharmaceutical companies trying to factor the inherent risks of drug development into their deals.