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Deal Watch November 2016

Actelion, Allergan, Johnson & Johnson, Novartis and more feature in this month's pharma deals round-up

Medius Deal Watch September 2016

This month's deals cover a full range of therapeutic entities - everything from gene therapy and siRNA to generics and biosimilars. Around half of the deals in the November Deal Watch table are acquisitions of companies, businesses or assets, or investment-based transactions. However in reviewing deals on a regular basis there is a sense that deal making is slowing down and, certainly for this month, the overall headline value for the top 20 transactions is much lower than in previous Novembers and, significantly, there are no $bn transactions.

YearOverall headline value for November's top 20 deals ($bn)
20163.63
201523.30 (a)
201498.63 (b)
201320.98

(a) excludes $160bn Pfizer bid for Actavis/Allergan which was ultimately terminated
(b) includes Actavis' $66bn acquisition of Allergan

But there may be some big deals in the wings...
Having said that there may well be some large deals in the pipeline. Johnson & Johnson has confirmed that it is in discussions to acquire Actelion. According to various commentators quoting unnamed sources, J&J's initial bid of around $26bn was rejected by Actelion and apparently a revised bid has been made of over $27bn. So we await with interest to see where this goes. Will other pharma companies seek to court Actelion and a bidding war ensue? To date it seems Sanofi is also considering a move.

Meanwhile Novartis is reportedly considering a sale of its contact lens business which is part of the Alcon eye care division. Revenues from this business in 2015 were $646m, down 7.4%. Analysts suggest the contact lens business could be worth somewhere between $1-1.6bn.

Another reason why the overall deal headline values could be down in part is that some companies seem to be increasingly coy about what they are paying. During November there were several deal announcements where only the upfront payment was published and, although downstream development, clinical, regulatory and sales milestones were to be paid, these were undisclosed. Examples of this were the deals Bristol-Myers Smith announced with Nitto Denko for an siRNA therapeutic for the treatment of advanced liver fibrosis, and with French company Enterome for an immuno-oncology collaboration based on Enterome's microbiome technology. The upfront payments were $100m and $15m, respectively.

Similarly Allergan has not made public the overall headline value of its acquisition of Chase Pharmaceuticals, opting instead to refer to the upfront of $125m and additional regulatory and sales milestones related to Chase's phase III ready lead compound, CPC-201 for Alzheimer's, and certain backup compounds. According to press sources, the additional milestone payments could be up to $875m making the overall deal worth around $1bn.

Options exercised
The largest deal in our table this month is the acquisition of Selexys Pharmaceuticals by Novartis for $665m in upfront, acquisition and milestone payments. This is the exercise of an option from an agreement announced in September 2012 under which Novartis had taken an exclusive option to acquire Selexys and its lead anti-P-selectin antibody, SelG1, after the completion of a phase II study in patients with sickle cell disease (SCD). SelG1 showed a significant reduction in acute painful episodes, called sickle cell-related pain crises (SCPC), in a 198 SCD patient study. Significant improvements were also achieved for several secondary endpoints including increases in times to first and second SCPC.

While agreeing a price for an option so far ahead can be built on financial forecasts and models, it does not take account of the vagaries of current market trends and the willingness of companies to pay big money to secure an asset in a particularly sought after area. Whether Selexys could have attracted a larger or smaller valuation on the open market if it had not been tied to Novartis remains to be seen, but for a biotech that had just completed a Series A of $23m in 2012 at the time of the original option agreement this must be a pleasing outcome.

Generics and biosimilars theme
There were several generic- and biosimilar-focused deals this month. Aceto Corporation acquired generic company Citron Pharma and its distributor affiliate, Lucid Pharma, for $462m including an upfront of $270m in cash and further deferred cash and equity based payments of approximately $142m. The consideration also included a five-year earn out of $50m based on the financial performance of four specific pipeline products. This represents around 2.4 times sales.

Also in this space Sun Pharma, now the world's fifth largest generic company, has taken a majority stake (85.1%) stake in Russian company, JSC Biosintez, for an equity consideration of $24m. Sun Pharma will also assume Biosintez's $36m debt as part of this transaction. Focusing on the hospital segment in Russia and the CIS region, Biosintez had annual revenues in 2015 of approximately $52m, so the transaction value based on 100% of the equity represents around 1.35 times sales.

The company has manufacturing facilities covering APIs and a wide variety of dosage forms ranging from injectables to tablets, creams and gels. Making an acquisition in an emerging market is part of Sun Pharma's strategy and this taps into the $10bn Russian market, which is showing annual growth of around 7.4%.

We are starting to see more deals covering biosimilars and this month Poland-based Mabion signed a supply and commercialisation agreement with Mylan for a biosimilar of Roche's Mabthera/Rituxan(rituximab) in all EU countries and non-EU Balkan states. Paying $10m upfront, milestones up to $35m and royalties on net sales, Mylan gains access to Mabion CD20, a biosimilar monoclonal antibody against the protein CD20, which is primarily found on the surface of B cells. By destroying B cells, rituximab is used to treat diseases characterised by excessive numbers of B cells, overactive B cells or dysfunctional B cells including many lymphomas, leukaemias, transplant rejection and autoimmune disorders, such as rheumatoid arthritis.

Mabion's website states that its technology enables a higher efficiency in antibody production compared to its competitors and therefore anticipates that its products will be 30-40% cheaper than the competitors.

The patents covering MabThera/Rituxan expired in Europe in February 2013 and in the US in September 2016. With originator drug sales of $7.1bn in 2015 this is a very attractive and competitive opportunity with many biosimilar and generic companies seeking a piece of the action. In May this year Sandoz announced that a regulatory submission for its version of rituximab had been accepted by the EMA following multiple clinical trials in over 800 patients.

To complete the biosimilars theme for this month and moving along to "biobetters" (i.e. products that show superiority in one or more aspects of their clinical profile compared with the reference product), Eagle Pharmaceuticals has acquired MIT spin-out Arsia Therapeutics for $78m. Arsia has a proprietary viscosity reducing technology and know-how to enable the development of high concentration formulations of biologics that can be administered by subcutaneous injection rather than intravenously. Eagle's current focus is on the development of novel, optimised formulations of FDA-approved injectable drugs via the 505(b)(2) regulatory pathway. The Arsia acquisition marks Eagle's entry into biologics, which is a very different area requiring distinct capabilities and expertise. To address this Eagle plans to establish a Biologics Innovation Center in Cambridge, Massachusetts.

Immuno-oncology - acquisitions, building networks and unwelcome news
The immuno-oncology theme continues this month with several transactions reported, two of which are in the table. The Celldex Therapeutics $235m stock for stock acquisition of Kolltan Pharmaceuticals brings a portfolio of antibody therapeutics in oncology/ immuno-oncology. These include KTN0158, which inhibits KIT (a receptor tyrosine kinase protein, RTK) activation in tumour cells and mast cells and which is currently in a phase 1 study in refractory gastrointestinal stromal tumours (GIST). Kolltan also has a broad antibody discovery programme to generate antibodies that modulate the TAM (Tyro3, AXL and MerTK) family of RTKs which are aberrantly expressed in multiple haematological and epithelial malignancies. As with PD-1 and other checkpoints, TAMs regulate the immune response to cancer and therefore TAMs have broad application and potential across immuno-oncology and immunology.

Strengthening its expertise and capabilities in immuno-oncology, this month Roche invested $100m and launched a global network of 21 academic cancer immunotherapy centres of excellence called imCORE. The objective of this network is to access and share technology, data and expertise to enable a rapid progression towards preclinical and clinical research based on new discoveries in the immuno-oncology field.

One piece of unwelcome news this month was from Juno Therapeutics, which announced it had halted a phase 2 trial of JCAR015, its CAR T cell immunotherapeutic, in patients with relapsed or refractory B cell acute lymphoblastic leukaemia after two patients developed cerebral oedema and died. This is by no means a new problem as three patients died in July in the same trial but the FDA allowed it to restart because, at the time, the deaths were thought to be a result of the chemotherapy regimen used to prepare the patients before administering the CAR T cell therapy.

Winding back two years, Juno enjoyed the biggest Nasdaq IPO of 2014 raising around $265m at $24 per share. In June 2015 Celgene and Juno signed a 10 year collaboration with a headline value of $1bn to commercialise Juno's cancer and autoimmune pipeline and as part of this Celgene purchased 9.1 million Juno shares at $93 per share. At the end of this November Juno shares were trading at around $20 per share and to date they have not recovered. This is despite some positive news for Juno released at the recent ASH meeting that another of its CAR T cell therapeutics, JCAR017, showed a 60% complete response in patients with relapsed or refractory aggressive CD19+ Non-Hodgkin Lymphoma. Moreover only 14% of patients suffered severe neurotoxicity and no severe cytokine release syndrome (a common and potentially severe toxicity associated with CAR T cell therapy) was observed to date. Whilst both JCAR015 and JCAR017 target the cell surface protein CD19, the two therapeutics differ in multiple respects: they have different binding domains, different co-stimulatory domains, use different ablation technology and utilise different T cell populations.

As Juno wrestles with bad publicity and a depressed share price, Novartis and Kite Pharma, also active in the CAR T cell space, presented promising data at the ASH meeting for their own CAR T cell therapies - so CAR T cell therapy seems to be still alive and doing well.

Licensor Acquired/ Licensee AcquirerProduct/ TechnologyDeal TypeHeadline ($m)
Selexys Pharmaceuticals/ Novartislead product - SelG1, anti-P-selection mAb for reduction of vaso-occlusive pain crises in patients with sickle cellacquisition - company (option exercise)655
Citron Pharma | Lucid Pharma / Acetogeneric company and distributoracquisition - company462
Kolon Life Science | TissueGene / MitsubishiInvossa, cell-mediated gene therapy for knee osteoarthritis by intra-articular injection (NDA S.Korea)*Licence434
Navidea Biopharmaceuticals /Lymphoseek (technetium Tc 99m tilmanocept) for lymph diagnostic in cancer (marketed)**acquisition - asset310
Kolltain Pharmaceuticals/ Celldex Therapeuticsoncology/ immuno-oncology mAb portfolio inc KTN0158, mAb inhibitor of KIT activation in tumor cells and mastacquisition - company235
Idera Pharmaceuticals/ Vivelix PharmaceuticalsIMO-9200, antagonist of TLR 7,8 and 9, for non-malignant GI disorders (p1) + back upslicence, collaboration207.5
Proterosos biostructures/ Merck & Co (MSD)second collaboration to develop small molecules against an additional epigenetic target for various cancerslicence, collaboration167
Aimmune Therapeutics/ Nestlé Health ScienceCODIT (Characterised Oral Desensitisation ImmunoTherapy), for treating life-threatening foodequity investment, 2 year collaboration145
Chase Pharmaceuticals/ Allerganfixed dose combinations for Alzheimer's and other neurodegenerative diseases inc CPC-201 (donepezil +)acquisition - company125+
MorphoSys/ Leo Pharmadiscovery and development of mAbs for skin diseasesStrategic alliance, options122.7 per
BMS/ Lexicon PharmaceuticalsBMS-986176 for neutopathic pain (pc) plus other small molecules that act on same targetlicence115.5
Medivir | BioPhausia/ Karo Pharmabusiness with 13 established pharma drugs†acquisition ‐ business
100.7
21 Cancer Immuno-oncology Centres/ Rocheglobal network of 21 cancer IO centres of excellence to access and share technology, data and expertiseinvestment/ launch of global IO network100
Nitto Denko/ BMSND-L02-s0201 (siRINA) for advanced liver fibrosis (p1b)licence, options100+
Atopix Therapeutics/ Eagle Pharmaceuticalsviinc OC459, oral CRth2 antagonist, for severe asthma with persistent airway eosinophilia (p2)acquisition - company80
Arsia Therapeutics/ Eagle Pharmaceuticalsviscosity reducing technology and formulation know-how with "biobetter" focus
acquisition - company78
JSC Biosintez/ Sun PharmaRussian pharma focusing on hospital segment with 2015 revenues of approx $52m††acquisition of 85.1% stake
60
Broad Institute/ IBM Watson Healthreserch initiative aimed at discovering the basis of cancer drug resistance5 year collaboration50
Mabion/ MylanMabion CD20 - Mabthera/Rituximab biosimilar (p3)‡development and commercialisation
45
Infinity Pharmaceuticals/ VerastemDuvelisib, oral inhibitor of PI3K‐delta and PI3K‐gamma for haematological cancers (p3)licence28

All deals are for worldwide rights unless stated otherwise:

* Japan
** North America
† Nordic region
†† Russia
‡ EU, non-EU Balkan states

1Deal headline value: as frequently quoted in press releases, based on the sum of initial (upfront/ signature) payments, option fees, R&D funding, development milestone payments, sales threshold and other success or contingent payments, as cash or equity. This does not typically include royalty payments.

2Ataga et al, Abstract, American Society of Hematology (ASH), December 2016

Jill Ogden has over 29 years of commercial and R&D experience in the biopharmaceuticals and healthcare industries and provides our biologics, early stage deals and platform technologies expertise. She has worked for a number of mid-caps and biotech companies, both public and private. Jill has led and been involved in a wide range of product and technology deals, including corporate M&A.

20th December 2016

From: Sales

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