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Deal Watch December 2016

Allergan, AZ, BMS, Pfizer, Roche and more feature in this month's pharma deals round-up

Medius Deal Watch September 2016This year, we planned Christmas like a military campaign. Turkey dinner for the extended family? Check. Presents for family and friends? Check. Christmas stockings? Check. All this took time and effort but it was well worth it, as all was prepared and ready for Christmas itself, the unwrapping, the eating, the drinking, the family rows, etc. No last minute rush for me. Our elder son, on the other hand, looked around the house two hours before the family arrived on 23 December and asked: “Oh, are we giving presents?”. Our (unprintable) reply sent him out of the house to do his shopping. He returned an hour later, asked for wrapping paper and was all prepared for the onslaught of the family. Lo and behold, it came to pass that his presents were the success of the evening. Every recipient thought that he had bought the best chosen, the most imaginative or the most fun presents. Some people just have the skill to do their Christmas shopping at the last minute.

This came to mind when looking at the 39 deals Medius reviewed for December: 14 of them closed just a few days before Christmas and we felt very sympathetic towards all the people who worked on finalising these deals, which no doubt involved long and stressful workdays (and nights). But maybe they are expert last-minute shoppers, and were also the success of their families as they emerged on 23 December ready for the fun of Christmas with one and a half days left to shop and prepare. And for the teams working on the deals that were announced on 26 and 27 December - there's always next year.

Not only was December busy, with 39 significant deals, it was also as rich as a Christmas pudding. In terms of headline figures (33 of the 39 deals announced financials) December came in at $29bn, second only to January 2016 at $42bn (which included the $32bn Shire-Baxalta deal). Only August 2016 ($21.4bn, including $14bn for the Pfizer Medivation deal) came close. And not only was December remarkable for heady headline figures, the upfront money was also substantial - amounting to $16.3bn from the 23 deals that declared the upfront payment. Excluding the Shire-Baxalta and Pfizer-Medivation deals, the figure for total (disclosed) upfront payments typically ranges between $1-6bn per month.

Furthermore, in terms of the number of deals with significant headline figures this was a bumper month. While the table of the top 20 deals by headline figure frequently includes deals barely into double figures at the tail end, in December 2016 we have included the top 25 deals by headline figure, and still the 25th deal is valued at $135m.

Table 1: Top 25 deals in December 2016 by headline figure

Licensor / Acquisition target
Licensee / Acquirer
Deal type*
Product /technology
Headline $m
Capsugel (US)
Lonza (Switzerland)
Acquisition
Oral delivery technologies, development, formulation and manufacturing for pharma, consumer and nutrition products
5,500
Merus Labs (Canada)
Incyte (US)
Discovery collaboration
Biclonics bispecific antibody technology for up to 11 research programmes, including 2 in immuno-oncology
3,000
LifeCell (US)
Allergan (Ireland)
Acquisition
Portfolio of dermal matrix products used in surgery
2,900
BSN Medical (Germany/UK)
Svenska Cellulosa (Sweden)
Acquisition
Portfolio of marketed and development products for wound care and orthopaedic surgery
2,860
Selecta Biosciences (US)
Spark (US)
Licence
Platform technology: Synthetic Vaccine Particles (SVP) for co-administration with Spark's gene therapy products
2,180
Hologic (US)
Grifols (Spain)
Asset acquisition
Nucleic Acid Testing (NAT) technology for R&D and manufacturing of assays and instruments for blood screening
1,850
Bicycle (UK)
AstraZeneca (UK)
Licence collaboration
Bicycle platform: small molecules with antibody specificity for targets in respiratory, cardiovascular and metabolic diseases
1,000
Vascular Solutions (US)
Teleflex (US)
Acquisition
Portfolio of medical devices for coronary and peripheral vascular procedures
1,000
Akebia (US)
Otsuka (Japan)
Licence (US)
Vadadustat: oral hypoxia-inducible factor (HIF) stabiliser in phase III for anaemia of chronic kidney disease
995+
PsiOxus Therapeutics (UK)
BMS (US)
Licence
NG-348: preclinical “armed” oncolytic virus targeting tumour cells
936
CB Fleet (US)
Prestige Brands (US)
Acquistion
Summer's Eve and other brands in feminine and OTC healthcare
825
Exicure (US)
Purdue Pharma (US)
Research collaboration & options
Spherical Nucleic Acid (SNA) technology for discovery and development of psoriasis treatment; option to AST-005
790
Tolero Pharma (US)
Dainippon Sumitomo (Japan)
Acquisition with milestones
Portfolio, including alvocidib, a CDK9 inhibitor with phase II completed in AML
780
Claris (India)
Baxter (US)
Acquisition
Portfolio of generic injectibles (marketed and in development)
625
CMC Biologicals (Denmark)
Asahi Glass (Japan)
Acquisition
Manufacturing of therapeutic proteins (MAbs, coagulation factors, etc.)
511
BioInvent (Sweden)
Pfizer (US)
Research collaboration
Development of immuno-regulatory antibodies targeting tumour-associated myeloid cells
510
Nuevolution (Denmark)
Almirall (Spain)
Research collaboration
RORγt inhibitors for inflammatory skin diseases and psoriatic arthritis
453
ImmuNext (US)
Roche (Switzerland)
Licence
Rights to develop and commercialise therapeutic products that agonise the VISTA (negative checkpoint regulator) signalling pathway400
X-Chem (US)
Taiho/ Otsuka (Japan)
Discovery collaboration & licence
Access to DEX technology, DNA-encoded libraries to generate novel small molecules
352
JHL Biotech (Taiwan)
Sanofi (France)
Strategic Alliance
Development and commercialisation of biosimilars
337
Mettrum (Canada)
Canopy (Canada)
Acquisition
Marketed medical marijuana and hemp brands
320
Evotec (Germany)
Celgene (US)
Discovery collaboration
Induced pluripotent stem cells for neurodegenerative diseases
295
Novartis (Switzerland)
Sun Pharma (India)
Asset acquisition
Odomzo (sonidegib; hedgehog pathway inhibitor), approved in basal cell carcinoma
175
Creabilis (UK)
Sienna
Acquisition
Portfolio of first-in-class topical
150

*Global rights unless stated

This rush by companies to spend their 2016 budgets was mainly for acquisitions. Of the 39 deals 17 were acquisitions, across a wide range of health care areas, from delivery technology to blood screening products, via OTC, surgical products and medical marijuana. And of these acquisitions 14 of them are paid-up - only three are structured like licensing deals, recognising the absence of marketed products and the remaining risks and uncertainties inherent in the acquisitions.

Table 2: Acquisitions structured with milestone payments

Acquired
Acquirer
Headline ($m)
Deal structure
Comments
Creabilis
Sienna Biopharmaceuticals
$150m
Undisclosed upfront payments. Regulatory and commercial milestone payments “could exceed $150m”
Lead product is in phase IIb for the treatment of pruritis and psoriasis
Tolero Pharmaceuticals
Dainippon Sumitomo
$780m
Upfront payment of $200m. Development milestones of up to $430m. Commercial milestones of up to $150m
Lead product has completed phase II in acute myeloid leukaemia
Carpegen
Curetis
€17m ($18.06m)
Upfront payment of 5m ($5.3m), up to €2.5m ($2.66m) in regulatory milestones. Up to €9.5m ($10.1m) in sales royalties
Gyronimo qPCR molecular diagnostics platform. CE marking expected late 2018

Twelfth Night - The visit of the Wise Men Bearing Gold, Frankincense and Myrrh

Of the 14 acquisitions where the purchase price was announced the total came to $17.6bn, which is a lot of gold. So the question is: was it delivered by wise men (and women)? With acquisitions designed to achieve the two different strategic aims of focusing or diversifying it is clearly too soon to opine on the outcome, but the markets have already had their say. Lonza's $5.5bn acquisition of the CDMO Capsugel caused a fall in their share price of 10% compared to the previous week, although it has now bounced back. Allergan's expenditure of $2.9bn was rewarded with a 12% rise, but SCA's outlay of $2.86bn on BSN Medical brought a 1% fall by the beginning of January.

Table 3: Acquirer's share price change from day prior to announcement to 4 January 2017

Acquired
Acquirer
Share price movement
Hologic Blood screening products
Grifols
+13.6%
LifeCell
Allergan
+12.3%
Vascular Solutions
Teleflex
+8.8%
Capsugel
Lonza
+8.4%
CB Fleet
Prestige Brands
+8.3%
Tolero
Dainippon Sumitomo
+4.1%
Novartis - Odomzo® deal
Sun Pharma
+3.5%
BSN Medical
Svenska Cellulosa
-0.7%
Claris
Baxter
-1.3%
CMC Biologicals
Asahi Glass
-4.5%
Mettrum
Canopy
-5.9%

Source: Yahoo Finance

The Gold award is won by Grifols, with a 13.6% rise in share price since the acquisition. The Frankincense award goes to Canopy, with its acquisition of Mettrum, thanks to the the heady scent of the product. This acquisition was rewarded with a 6% fall in Canopy's share price since the acquisition, but it will not be winning the Myrrh award, which is postponed until next year. By 2018 it will be clear which deal sounded the death knell for the acquiring company - one month is, of course, much too short a time frame to gauge the impact.

The Proof of the Pudding is in the Eating
13 of the 39 deals this month are licences or strategic collaborations involving platform or enabling technology for the discovery and/or development of new drugs. Despite the early stage, the headline figures for these deals can be eye-watering, such as the deal between Merus and Incyte at $3bn, Selecta and Spark at $2.2bn, AstraZeneca and Bicycle Therapeutics at $1bn, and the Purdue Pharma-Exicure deal, at $790m. But companies become much shyer about announcing how much money they are prepared to put where their mouth is, with only six of the 13 companies revealing how much they paid upfront. And although the upfronts are a modest percentage of the headline figure, ranging from <1% (BioInvent) to 15% (Evotec) they represent real cash down, particularly when other committed payments, such as equity, are included. Sanofi's payments to JHL, the Taiwanese manufacturer of a rituximab biosimilar, total $101m upfront for the China market alone; 30% of the headline figure.

Table 4: Discovery and research agreements

Licensor
Licensee
Headline
Upfront ($m)
Technology
Merus
Incyte
$3,000m
$120m plus $80m equity
Bispecific antibodies
Evotec
Celgene
$295m
$45m
Induced pluripotent stem cells
JHL
Sanofi
$337m
$21m plus $80m equity
Biosimilars
Nuevolution
Almirall
$453m
$11.8m
Inhibitors to transcription regulatory factor RORγt which affects IL17A expression
Selecta Biosciences
Spark
$2,180m
$10m plus $5m equity
Synthetic vaccine particles to facilitate repeat dosing of Spark's gene therapy products
BioInvent
Pfizer
$510m
$4m (including committed research payments) plus $6m equity
Development of antibodies targeting tumour-associated myeloid cells
Bicycle
AstraZeneca
$1,000m
Not disclosed
Bispecific antibody technology
Exicure
Purdue
$790m
Not disclosed
Spherical Nucleic Acid technology and a topical anti-TNF product
ImmuNext
Roche
$400m
Not disclosed
Products that agonise the V-region immunoglobulin-containing suppressor of T-cell activation (VISTA, a negative checkpoint regulator) signaling pathway
X-Chem
Taiho
$352m
Not disclosed
DNA-encoded library
Abzena
Trieza
$35m
Not disclosed
Antibody sequence for use with Trieza's viral vector technology
Semma Therapeutics
Defymed
Not disclosed
Not disclosed
Bio-artificial pancreas for Type 1 diabetes
Arcturus
Takeda
Not disclosed
Not disclosed
RNA-based therapeutics using oligomer technology

Behind the headlines of these early stage deals it is notable that four of these 13 out-licensing companies are frequent fliers in Medius's Monthly Deal Watch publications, and two of these compete in the provision of DNA-encoded high throughput screening and lead optimisation.

X-Chem Pharmaceuticals in particular is making its fourth appearance of the year, having previously made agreements with Johnson & Johnson in March and with Bayer and AbbVie in July. With its technology validated by premier league players there will no doubt be other companies queuing up for access to its drug discovery engine, The DNA-Encode X-Chem (DEX) library, consists of a library of over 120 billion small molecules tethered to DNA tags which encode their synthetic history. When the library is screened using affinity-based binding to a partner's target the molecules that bind can be extracted and DNA sequencing used to identify clusters of related molecules. These can then be used to guide structure-activity relationships to enable the optimisation of a molecule to a drug. The Scandinavian company, Nuevolution, uses its drug discovery platform Chemetics to discover novel small molecules in the field of chronic inflammatory diseases, including psoriasis, rheumatoid arthritis, non-alcoholic steato-hepatitis (NASH), inflammatory bowel disease and multiple sclerosis. The technology is also based on a library of molecules attached to a DNA sequence which permits screening of targets against its library followed by a “hit-to-lead” optimisation process designed to optimise the cost of production of the selected molecules.

The other two companies, the Swedish company, BioInvent, and the British company, Abzena, have technologies based on monoclonal antibodies. Abzena's services include antibody discovery and optimisation, and in December the company concluded a deal with Trieza to use its Composite Human Antibody Technology together with Trieza's viral vector technology in the development of immunomodulatory oncolytic viruses. Abzena's technology is used to humanise and de-immunise antibodies by avoiding CD4+ T-cell epitopes. In January 2016 Abzena concluded a deal with an undisclosed partner for a headline figure of $150m. BioInvent has two technology platforms, n-CoDeR, a library of 30bn human antibody genes and F.I.R.S.T., a screening tool that enables simultaneous identification of targets associated with diseases and the complementary antibody. Pfizer's deal is using the latter technology to identify novel targets and antibodies to reverse the immunosuppressive activity of tumour-associated myeloid cells.

The size of the deals signed by AstraZeneca with Bicycle Therapeutics, by Spark with Selecta Biosciences and by Celgene with Evotec suggest that their technologies (Bicycle's bicyclic peptides, which combine the affinity and selectivity of antibodies with the properties of small molecules, Evotec's induced pluripotent stem cells and Selecta's Synthetic Vaccine Particles, which suppress the formation of neutralising antibodies when co-administered with a specific antigen) will again be in demand in 2017.

And a Happy New Year to All our Readers!

20th January 2017

20th January 2017

From: Sales

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