When writing this bimonthly edition of Medius’s Deal Watch I have been struck by how often the words ‘it’s unusual…’ have appeared. Most months we focus on the usual and explore trends during the previous months or years; this time we have taken some space to highlight the unusual as well.
It is unusual
It’s unusual to see a termination in the top 20 deals, but in early October the Korean company Samsung Bioepis disclosed that Merck & Co had terminated its agreement for the development and commercialisation of a follow‐on insulin glargine product to Sanofi’s Lantus. Samsung Bioepis is a joint venture between Samsung and Biogen Idec; the latter recently (June 2018) invested $700m to bring its stake in the jv to 49.9%.
The deal between Merck & Co and Samsung Bioepis has been in place since 2013, when Merck & Co began to work with Samsung Bioepis to produce biosimilars. The termination comes as a consequence of patent infringement litigation which has placed a stay on the FDA’s approval of the biosimilar, Lusduna Nexvue, in the US. Merck & Co has paid $155m to Samsung Bioepis to cover the investments made so far, plus interest, in the product. None of the other biosimilars in the agreement between the two companies, in the fields of oncology and immunology, are affected.
The introduction of biosimilars to Humira in the US has been delayed to 2023 for Amgen, Mylan and also Sandoz, with all three agreeing to delay the introduction of their biosimilars to Humira in the US, while launching them in Europe.
With $18B of sales worldwide to protect it is not surprising that AbbVie is taking a firm stance on Humira biosimilars; only Boehringer Ingelheim has elected to go to court to fight AbbVie.
According to Fierce Pharma the AbbVie Chairman & CEO has predicted sales erosion of 26‐27% ex‐US, which is significantly lower than the sales erosion that might be expected from a non‐biologic product post‐patent loss, highlighting the benefits of biologics in the long term and the complexities of developing and manufacturing them.
US drug prices
In other news from the US, there are now expectations of a legislative stalemate following the mid‐term elections in early November. It is worth remembering that there are still a few areas where both political parties are prepared to work together and one of these is reducing drug prices. Given the president is likely to have problems getting some of his more controversial laws through Congress, the opportunity to pass legislation that both sides favour could be attractive. The Health Secretary, Alex Azar, has promised more to come on “fixing” drug pricing and introducing transparency into drug prices, and in the present political climate that can only be good news for payers and patients.
Mergers and acquisitions – still waiting for the tax-driven wave of activity
Switzerland has been humming in the last two months, with Novartis doing five and Roche four sizeable deals.
Novartis
| Deal Type | Deal with | Details | Value |
| Acquisition | Endocyte | Portfolio of products and technology for radioligands and CAR‐T for cancer |
$2.1B |
| Sale | Aurobindo | NovartIs sold part of Sandoz’s US generics and the dermatology division to Aurobindo |
$1B |
| Sale | Mylan | TOBI | $463m |
| Licence and Manufacture |
Cellular Biomedicine |
Novartis will invest in Cellular for the manufacture and supply of Kymriah |
$40m |
| Development collaboration |
Pfizer | Novartis to develop combination treatments for NASH with Pfizer products |
Not disclosed |
One of the big deals for Novartis these last two months was the long‐rumoured sale of it’s Sandoz division’s US dermatology and US generic oral solids portfolio to Aurobindo Pharma USA. The price, $1B, made up of $900m in cash and up to $100m in potential earn‐outs is less than 1x sales, given that reported first half sales amounted to $600m in 2018, and includes 300 products, development projects, branded dermatology products and the dermatology development centre and three manufacturing sites in the US. Sandoz’s US business has retained its biosimilars, value‐added medicines and complex generics, including the ophthalmology products.
Even larger is the $2.1B that Novartis will pay for the acquisition of Endocyte, a company with innovative technology in radioligands and CAR‐T adaptor molecules for cancer treatments. Endocyte’s lead clinical product is 177Lu‐PSMA‐617, which uses its proprietary drug conjugation technology to deliver Lutetium‐177 directly to tumours. The product is in development for the treatment of metastatic castration‐resistant prostate cancer and is in phase 3 trials. Endocyte’s adaptor controlled CAR‐T technology delivers the molecule FITC to the tumour through a tumour‐targeted ligand. FITC, which is not naturally present in the body, then becomes the target for CAR‐Ts expressing high affinity for FITC.
It’s unusual to see a licensing agreement between two of the largest of the big pharma companies, but the end of October saw the announcement of an agreement between Novartis and Pfizer for a clinical collaboration to advance the treatment of non‐alcoholic steatohepatitis. The agreement is driven by the belief that liver diseases will respond best to combination therapies and as NASH is a highly prevalent condition with no available treatment today the unmet medical needs and opportunities are high. The agreement covers a clinical trial to evaluate the combination of Novartis’s tropifexor, a non‐bile acid farnesoid X activated receptor (Fxr) agonist, with one or more compounds from Pfizer, including an acetyl CoA‐carboxylase inhibitor, a diacylglycerol O‐acyltransferase 2 inhibitor and a ketohexokinase inhibitor. Given the trend towards combination and personalised therapies that we are seeing across several therapeutic areas, we expect to see more and more of this type of clinical collaboration deal in the future.
Mylan has enhanced its respiratory portfolio with the acquisition of Novartis’s TOBI Podhaler® and TOBI® solution, both products for treating Pseudomonas aeruginosa infections in cystic fibrosis patients. Mylan will pay $463m in total, with $240m being paid in 2018.
And in an agreement for the manufacture and supply of Kymriah, Novartis has invested $40m in Cellular Biomedicine Group. While there is no royalty attached to the deal, Cellular will receive a mark-up on the manufacturing cost and also the unusual feature: “a single digit escalating percentage collaboration payment based on net product sales”. How this differs from a royalty we have no idea.
Roche
| Deal Type | Deal with | Details | Value |
| Expansion of collaboration |
SQZ Biotech | Joint development using SQZ’s cell therapy platform |
$1.375B |
| Option | Ionis | RNA‐targeted therapeutics for complement mediated diseases |
$760m |
| Acquisition | Tusk | Anti-CD25 antibody for cancer | $759m |
| Outlicence | Ark | Ark has in-licensed the global rights to the phase 1 idiopathic pulmonary fibrosis programme (AK3280 / GDC3280) plus related programmes |
Not disclosed |
Roche will pay $125m in upfront and near term milestones to expand its collaboration with SQZ Biotech, first started in 2015. This agreement, which is to combine SQZ’s expertise in cell therapy with Roche’s expertise in immunotherapy will develop cancer products based on the combined technologies, and is anticipated to improve the safety profiles of the products while also cutting production time and costs. The clinical, regulatory and sales milestone payments total up to $250m per product, plus a further $1B in development milestones.
Roche will pay up to $759m for its acquisition of Tusk Therapeutics, a UK‐based company which develops immuno-oncology treatments. The payments will be made with €70m ($81m) upfront with up to €585m ($678m) being payable in milestones. Although described as an acquisition, the deal covers two products, including an anti-CD25 antibody that depletes regulatory T‐cells (Tregs) while preserving IL‐2 binding and signalling on effector T‐cells (Teffs). Tusk’s first in class anti-CD25 antibodies are expected to enter clinical trials next year. The remaining assets of the company are being spun out of Tusk and will form a new company called Black Belt Therapeutics.
Top 20 deals | September and October 2018
| Licensor Acquired/ Licensee Acquirer |
Product / Technology | Deal Type | Headline ($) |
| Arrowhead/ Janssen (J&J) |
Development & commercialisation of ARO‐HBV, based on the TRiM™ platform, for chronic HBV infection |
Licence | $3.7B |
| Endocyte / Novartis |
Radiopharmaceuticals and drug conjugation technology, including 177Lu‐PSMA‐617 for metastatic castration-resistant prostate cancer |
Acquisition | $2.1B |
| Acquisition | Dermocosmetic, cosmetic and skin care products | Acquisition | $2B |
| Tango Therapeutics/ Gilead Sciences |
Pipeline of up to 5 targeted immuno‐oncology treatments based on functional genomics discovery platform |
Strategic collaboration |
$1.75B |
| SQZ Biotech/ Roche |
Oral solid generics and dermatology business | Collaboration | $1.375B |
| Sandoz/ Aurobindo | Cell therapy products based on antigen presenting cells for target‐specific killer CD8 T‐cell responses |
Acquisition | $1B |
| Tusk Therapeutics / Roche |
Anti-CD25 antibody designed to deplete regulatory T-cells (Tregs) while preserving effector T‐cells (Teffs) |
Acquisition | $759m |
| Ionis Pharmaceuticals/ Roche |
RNA‐targeted therapeutic, IONIS‐FB‐LRx targeting Factor B, for Geographic Atrophy, an advanced form of dry Age-related Macular Degeneration (AMD) |
Collaboration for development |
$760m |
| Enterome/ Takeda |
EB8018 for Crohn’s disease and other gastrointestinal and liver disorders |
Licence | $690m |
| Molecular Templates/ Takeda |
CD38‐targeted engineered toxin bodies (ETBs) for the treatment of multiple myeloma and other conditions |
Joint development agreement |
$665m |
| Dicerna/ Lilly |
GalXC™ RNAi technology platform for targets in Cardiometabolic disease, neurodegeneration and pain | Licensing & research collaboration |
$550m |
| Novartis/ Mylan |
TOBI Podhaler® and TOBI® solution for cystic fibrosis | Acquisition | $463m |
| Precision BioSciences/ Gilead Sciences |
ARCUS technology; targeting in vivo elimination of hepatitis B virus (HBV) |
Strategic collaboration ‐ development |
$445m |
| Innate Pharma/ AstraZeneca |
Anti-NKG2A antibody (monalizumab), IPH5201 (antibody targeting CD38) and Lumoxiti# for hairy cell leukaemia | Development & commercialisation collaboration |
$307m |
| ViraTherapeutics/ Boehringer Ingelheim |
Oncolytic viral therapies, including VSV‐GP platform targeting a broad range of cancers | Acquisition | $244m |
| Zealand/ Royalty Pharma |
Royalty streams and milestones for Soliqua® 100/33/ Suliqua® & Lyxumia®/ Adlyxin® for Type 2 diabetes |
Purchase of royalty rights |
$307m |
| Samsung Bioepis/ Merck & Co |
Lusduna Nexvue follow‐on biologic | Termination | $155m* |
| Strongbridge Biopharma/ Novo Nordisk |
MACRILEN (macimorelin) for diagnosis of adult growth hormone deficiency |
Acquisition of product rights |
$145m** |
| Proteus Digital Health/ Otsuka |
Digital medicines for mental health | Development collaboration |
$88m |
| Cellular Biomedicine/ Novartis |
Manufacture and supply of CAR‐T cell therapy, Kymriah®, for B‐cell acute lymphoblastic leukaemia | Licensing & collaboration |
$40m |
All deals are for worldwide rights unless stated otherwise:
* US
** US and Canada only
# US and EU
Roche’s collaboration with Ionis Pharmaceuticals has a headline of $760m, $1m more than the Tusk deal. Roche has an existing agreement with Ionis for IONIS‐HTTRx, an antisense drug for Huntington’s Disease, and the new deal is to develop the product IONIS‐FB‐LRx, which reduces the production of Factor B, for the treatment of complement mediated diseases. A phase 2 study in the condition Geographic Atrophy (GA), which is the advanced stage of dry age-related macular degeneration, will begin in 2019. The upfront payment for this deal is $75m, with $684m in fees and milestones, with royalties tiered from the high teens to 20% on sales. Effectively the deal is structured as an option, as the phase 2 study in dry AMD will be conducted by Ionis, and the company will also explore the drug in a specific rare renal condition. At the end of the studies Roche has the option to license the product whereupon it will take over the responsibility for further development and commercialisation of the product.
Finally, Roche has done a second deal with the China‐based company Ark Biosciences, which specialises in developing treatments for respiratory diseases, this time for worldwide development and commercialisation rights to the phase 1 product AK3280 (GDC3280) for the treatment of idiopathic pulmonary fibrosis. The previous licensing deal was for exclusive global rights to the phase 1‐ready RSV compound, AK0529 which is now in a phase 2 study.
So, what’s the score overall? Based on the actual payments (excluding milestones and royalties) Novartis has paid out $2.14B and received $1.46B; a net payout of $680m, while Roche has paid out $281m. Who’s the winner? We won’t know for many years.
Multiple deals from Gilead too
Gilead’s deal team has been particularly active these last two months, with three deals to their credit. The largest, at least by headline figure, is the strategic collaboration with Tango Therapeutics for the development of next generation targeted immuno-oncology products, and the value of the deal could exceed $1.75B.
Gilead has paid $50m upfront to gain access to Tango’s functional genomics‐based discovery platform, for which it has options on up to five targets. Potential milestones total $1.7B in addition to which Tango is eligible to receive tiered royalties up to the low double digits. Interestingly Tango retains the option to co‐develop and co‐detail two of these in the US, for which development costs will be shared, ex‐US rights will be eligible for milestones and royalties, and US profits or losses will be split 50:50.
Gilead has also agreed a strategic collaboration with Precision BioSciences worth $445m in potential milestones; in addition there are potential royalties tiered up to the mid‐teens. The agreement is for the development of therapies to eliminate the hepatits B virus (HBV) in vivo using the genome editing platform ARCUS. Development will be shared, with Precision responsible for the development, formulation and preclinical development and Gilead for the clinical development and commercialisation. Unusually, this deal does not mention any upfront payment being made.
Gilead’s subsidiary, Kite, has agreed a deal for a research collaboration with HiFiBiO Therapeutics, the Hong Kong-based company which is working on the discovery of therapeutic antibodies through single B cell screening and analysis. Gilead will use the technology to support the discovery of neoantigen‐reactive T cell receptors (TCRs) for the treatment of a range of cancers. The technology will take patient samples and screen them for shared antigen and neoantigen TCRs for use in adoptive cellular therapies. Gilead is paying $10m upfront with additional payments on achievement of milestones.
In other news from Gilead, the company has created a new subsidiary, Asegua Therapeutics, which will launch authorised generic versions of Epclusa® and Harvoni®, Gilead’s treatments for hepatits C virus (HCV). As Gilead’s patent estate around these compounds is being challenged around the world, this appears to be a strategy of getting their response in first, and fending off both branded and generic competitors by being active in both sides of the market.
For the scouts out there
Rumour is, by definition, unreliable but as we all know, fortune favours the well‐prepared. So it may be useful to review the rumours that have emerged recently about products and businesses that may be available for acquisition or licensing. The Bernstein analyst, Wimal Kapada, suggested recently that Bayer’s animal health division could be for sale or be spun out. The rationale is that Bayer’s pharmaceutical pipeline is in need of new products and that the sale of the animal health division, which offers a portfolio of products including for the prevention and treatment of parasite and other infections, could provide €6‐7B for enhancing the pharma portfolio. So two opportunities here – acquisition of animal health products and out-licensing to Bayer’s pharma business.
Takeda, whose $62B acquisition of Shire is meeting some resistance at home, is rumoured to be considering the sale of some Shire products as and when the acquisition is closed (expected in the first half of 2019). According to Bloomberg, the products Xiidra® eyedrops for dry eye and Natpara® for hypoparathyroidism may be considered as a source of funds to reduce the debt Takeda will incur in the acquisition.
In a third, widely reported rumour, Pfizer is said to be looking at divesting its women’s health division, which includes the product Premarin for the menopause. Given that Teva divested its women’s health division for $1.38B earlier this year, and that Allergan announced in May that it would divest its women’s health division, it may be a buyer’s market.
Next the respiratory portfolio of GSK may be on the block after a widely reported comment by Alex Hoos, the head of oncology at GSK. The suggestion was that the strategic focus of GSK will be directed towards growth areas and that the respiratory franchise may not make the cut. The business is substantial, with sales of £7B (~$9B) in 2017, growth of 7% in £ sterling, but only 3% at a constant exchange rate.
Finally, following a full pipeline review, Novartis has reduced its drug programmes from 430 to 340, leaving 90 products adrift, many of which may be available for acquisition or licensing.