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Deal Watch March 2016

AstraZeneca, Roche, Sanofi and Valeant are featured in this month’s roundup of pharma deals

Deal Watch March 2016March 2016 has been another relatively quiet month for deals, with the largest deal being the acquisition by Canon of Toshiba Medical Systems' diagnostic imaging business for a figure of over ¥700B ($6bn). Only one other deal had an upfront value of more than $1bn: the sale by UCLA to Royalty Pharma of its royalty rights to Xtandi with a cash payment of $1.14bn, of which UCLA nets $520m.

Medtech deals again high profile

Canon acquired Toshiba's Medical Systems Diagnostic Imaging business for $6bn. Canon, which already has operations in x-ray machines and eye examination devices, has been seeking to enter the high-margin medical device area for some years, while Toshiba Corporation is undergoing a restructuring following its accounting troubles. The sale of the diagnostic imaging business was believed to be hotly contested by Fujifilm and Konica Minolta, with Canon the successful bidder. The absence of overlap between the two businesses was also critical in enabling Canon's success, as there will be minimal anti-trust concerns.

Elsewhere in medtech - in a deal highlighting the interest in molecular diagnostics - DiaSorin, the Italian diagnostics company, strengthened its US position through the acquisition of Quest Diagnostics' subsidiary Focus Diagnostics for $300m in cash. In addition to expanding in the US (which is expected to account for 50% of its business in the near future) DiaSorin acquired Focus' Simplexa platform, as well as its portfolio of molecular diagnostics and immunodiagnostics products. DiaSorin also expects to expand its sales of its immunodiagnostics LIAISON product range in the US through the 200-hospital customer base that use Focus' product ranges.

Sanofi continues its activity

Over the last several Deal Watch articles, not a month has gone by without a high value deal from Sanofi - and March was no exception. In pharmaceuticals, Sanofi's deal with DiCE topped the Deal Watch chart with a headline value of $2.3bn. DiCE's technology platform's capabilities are aimed at unlocking protein-protein interfaces that have been unreachable to date using oral therapies, potentially enabling injectable therapies such as monoclonal antibodies to be replaced with oral therapies. The deal is a 5-year research collaboration and will use DiCE's platform to select and optimise low molecular weight compounds over a wide range of therapeutic targets. As always, the early money is slightly lower at $50m in equity, upfront, target exclusivity, technology access fees, and research services, and with up to $184m in research, clinical and regulatory milestones, per target, for 12 discrete targets. In addition, royalty payments on future sales are included in the deal.

If it ain't broke…

Seven of March's top 20 deals involve major pharmaceutical companies accessing novel technology and/or products. As usual, these come from significantly smaller organisations, but the range of deal types this month is very much in the “plain vanilla” mould, which has worked so well for so long. In addition to the Sanofi/DiCE agreement described above, three further research collaborations have been put in place, two licences and one acquisition.

Roche has paid $45m upfront with $965m in contingent fees, including options, milestones and royalties for the rights to up to five small molecules from Blueprint Medicines' drug discovery platform. These small molecules target immunokinases and potentially offer a novel route to modulating the tumour immune response.

AstraZeneca will pay up to $110m to extend its November 2014 agreement with Lipigon (a company specialising in Lipoprotein Lipase activators) to discover and develop small molecules aimed at stabilising Lipoprotein Lipase. Merck & Co has put in place a research collaboration with Harvard University with an upfront payment of $20m and further contingent payments covering small molecules targeting the transcription of enzymes altered in acute myeloid leukaemia and other cancers.

Again, to gain access to novel technology at an early stage of development, BMS has acquired Padlock Therapeutics outright, for a payment of $600m: $225m upfront and up to $375m in contingent payments. Padlock's technology targets autoimmune disorders with protein/peptidyl arginine deiminase (PAD) inhibitors and offers the potential to prevent disease development in patients with early stage disease. Padlock's technology and assets were partly built with IP and assets licensed from GSK in May 2015 in exchange for an equity grant.

Two deals involved products at a later stage of development: Dr Reddy's licence for Xenoport's phase II product XP23829 for plaque psoriasis, and Ipsen's licence for Exelixis's marketed product Cometriq (cabozantinib). Dr Reddy's paid $50m upfront with up to $190m in contingent development milestone payments and up to $250m in contingent commercial milestones as well as royalty payments up to the mid-teens. Ipsen paid $200m upfront for the rights (ex-North America & Japan) to commercialise Cometriq for medullary thyroid cancer and other indications. There is a further $545m in contingent commercial milestones and tiered royalties up to 26%.

Generics companies moving into new areas

Three of the top twenty deals this month are from specialty generics companies, all moving into new areas. Alvogen, a company with a portfolio of 350 generic products has a growth strategy aimed at difficult-to-make products and has acquired the Wisconsin-based generics company, County Line Pharmaceuticals for a reported $300m. County Line's portfolio includes 12 marketed specialty products with an estimated $100m in revenues, as well as 17 products in the pipeline due for launch in 2016 and 2017.

Sun Pharmaceuticals has entered the Japanese market with the $293m acquisition of 14 established prescription products from Novartis. Sun has gained $160m in sales with these brands, as well as an entrée into the Japanese market, and Novartis will continue to market and distribute the products until the marketing authorisations have been transferred to Sun.

In the animal health field Dechra Pharmaceuticals has expanded its presence in the US with the acquisition for $200m in cash of Putney, a developer of products for companion animals. Both companies have dermatology portfolios and with the acquisition of Putney, Dechra has also added anti-infective and pain management products to its own portfolio of endocrinology and ophthalmology products.

Can one have too much of a good thing?

Like chocolate at Easter, sometimes it may be possible to have too much of a good thing. Valeant Pharmaceuticals, a company founded in 1989 which has tripled its revenues in three years through a high profile series of deals, has been the subject of much speculation recently as it struggled with its accounts. Since 2011 it has made numerous acquisitions of companies, divisions and products (notably Medicis, Dendreon, Salix, Synergetics and Bausch & Lomb) expanding its therapeutic and geographical footprints and building a multi-billion dollar business. However, speculation over the accounts has triggered a 90% fall in the share price, from a high of $263.80 in August 2015 to $26 today. Valeant's buying spree has been funded with debt, which at the end of 2015 was estimated to total $31bn, leading to speculation that Valeant will sell Bausch & Lomb to reduce their debt.

Maybe deals are not always the ideal solution to everything.

Licensor Acquired / Licensee AcquirerProduct / TechnologyDeal TypeHeadline ($m)
Toshiba Medical Systems/ Canon Inc
Portfolio of diagnostic equipment including X-ray, MRI, Ultrasound and Nuclear Medicine systems
Acquisition – division
$5,869
DiCE Molecules/ Sanofi
Technology platform to select and optimise drug-like ligands targeting a range of therapeutic areas
Research collaboration
$2,258
UCLA/ Royalty Pharma
Xtandi – androgen receptor inhibitor
Acquisition of royalty rights
$1,140
Blueprint Medicines/ Roche
Small molecules targeting kinases for cancer immunotherapy
Collaboration – discovery, development & commercialisation
$965
Exelixis/ Ipsen
Cabozantinib (Renal Cell Carcinoma, Hepatocellular Carcinoma, other indications) and Cometriq® (medullary thyroid cancer)
Licence
$855
SkyePharma/ Vectura
Respiratory Drugs
Merger
$627
Padlock Therapeutics/ BMS
Protein/peptidyl arginine deiminase (PAD) inhibitors in rheumatoid arthritis and other autoimmune diseases
Acquisition - company
$600
Boehringer Ingelheim/ AbbVie
BI-655066: anti-IL-23 MAb in Phase III for psoriasis and other autoimmune disorders; and BI-655064: anti-CD-40 MAb in Phase I
Collaboration – development
$595
Xenoport/ Dr Reddy's
XP-23829 for plaque psoriasis and relapsing multiple sclerosis
Licence
$490
Quest/ DiaSorin
Focus Diagnostics' Simplexa™ platform and products in immunodiagnostics and molecular diagnostics
Acquisition – division
$300
County Line Pharmaceuticals/ Alvogen
Speciality generics – oral and topical
Acquisition - company
$300
Putney/ Dechra
Animal health – generics for companion animals
Acquisition – company
$200
TaiMed/ Theratechnologies
Ibalizumab – humanized MAb CD4-directed HIV entry-inhibitor
Collaboration – marketing & distribution
$171
AVEO Oncology/ CANbridge Life Sciences
AV-203; ErbB3 (HER3) inhibitory antibody for oesophageal cancer
Collaboration & licence
$134
Regeneron/ Bayer
Ophthalmology combination therapy: nesvacumab (Ang2 antibody) and aflibercept (VEGF trap)
Co-development
$130
Lipigon/ AstraZeneca
Cardiovascular disease & lipid disorders
Collaboration – research
$110
AstraZeneca/ Kyowa Hakko Kirin
Opioid-induced constipation – Moventig
Licence
$70
Harvard University/ Merck & Co
Oncology – transcription regulating enzymes for leukaemia & other cancers
Research collaboration & licence
$20
Interactive Motion Technologies/ Bionik
Neurorehabilitation: robotic tools
Acquisition – company
$18
VirtualScopics / BioTelemetry
Imaging technology
Acquisition – company
$16

All deals are worldwide unless otherwise noted – see below:

* ex North America

** China

*** ex US

† Japan

†† China ex HK, Macau and Taiwan

††† China

‡ France

‡‡ US

In association with Medius Deal Watch

6th May 2016

From: Sales

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