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Pharma deals during August 2013

Deal Watch: Major pharma collaborations, acquisitions and agreements in the past month

Pharma deals during August 2013As is customary this month's report focuses on deals with disclosed financial terms.  Of note this month has been Amgen's tortured take-over of Onyx and an overwhelming number of acquisitions.

Timing is of the essence

The Amgen / Onyx saga rumbled on throughout August. After two months of wrangling, an offer of $10.4bn was finally accepted by Onyx. The deal became Amgen's biggest buy since the 2001 $16bn Immunex acquisition, which delivered the rheumatoid arthritis drug Enbrel, one of the company's biggest sellers. Indeed it is the fifth-largest biotechnology deal ever.

The crown jewel Kyprolis (carfilzomib) is a proteasome inhibitor for the treatment of multiple myeloma which was launched in 2012 and has so far generated net sales of $189m. It is predicted to hit $1bn sales by 2016 and to reach peak annual sales of $3bn by 2021/2. Onyx has sole marketing rights with the exception of Japan where it is licensed to Ono Pharmaceutical.

See a table listing the deals mentioned in this article

To add to the glitter are two marketed drugs partnered with Bayer: Nexavar (sorafenib) for the treatment of advanced kidney and liver cancer and Stivarga (regorafenib) for the treatment of metastatic colorectal cancer and gastrointestinal stromal tumours. In 2012 these drugs generated $289.6m in revenue for Onyx.

Included in the Onyx clinical pipeline are sorafenib (in phase III for thyroid cancer) also partnered with Bayer and carfilzomib, which is currently in several multiple myeloma clinical trials. Palbociclib, which is the result of an early partnership with Pfizer and now being developed by Pfizer, is in phase III trials for advanced breast cancer and certain haematologic malignancies. If approved, Onyx will receive an 8 per cent royalty on global net sales of palbociclib.

The games began in June with Amgen's unsolicited offer of $120 a share, 38 per cent premium over the then stock price. In early July Onyx rejected the offer as “too low” taking up a tactic often employed by biotechs in danger of take over – “start a bidding war”. For a while the strategy worked and by late July several companies including AstraZeneca, Pfizer and Novartis were rumoured to be interested.  Amidst the frenzied speculation, however, Onyx' share value jumped more than 50 per cent, inevitably discouraging would-be bidders from joining the chase. 

Early August brought rumours that Amgen had raised its offer to $130 a share.  By mid-August only AstraZeneca and Amgen were left standing. Then came the tussle over data from ongoing clinical trials which Amgen insisted was needed to better evaluate Kyprolis' long-term prospects. It is not clear what additional information was finally released over the following week, however the key hurdle holding up talks was finally overcome, but at a price. The final offer represents $125 per share. Perhaps Onyx dallied a little too long.

This protracted process is indicative of the now “holy grail” status of cancer medicines. Cancer has become an important market accounting for $84bn in worldwide sales last year, second only to central nervous system treatments. It is predicted oncology will become the industry's top-selling category by 2018.

Buy, buy, buy
August brought an insatiable appetite for acquisitions covering all industry sectors: small molecules; biologics; New Drug Applications (NDAs); generics; over-the-counter (OTC); devices; manufacturing; and even remote monitoring.

The trend for generics and OTC consolidation seen in recent years continued unabated with five such deals reported this month.

The largest deal was Akorn's acquisition of its rival Hi-Tech Phamacal for $640m, representing a 23.5 per cent premium. The primary aim was to expand its eye drug portfolio to other dosage forms. Adding Hi-Tech, which specialises in difficult to manufacture liquid and semi-solid dosage formulations allows Akorn to expand into niche dosage forms such as oral liquids, topical creams and nasal sprays. In addition, Akorn will significantly increase its retail presence in both prescription and OTC products boosting revenues by more than $500m.

Generics business consolidation was also evident on this side of the pond. In a defensive move the German drugmaker Stada Arzneimittel announced the $345m take-over of the UK OTC company, Thornton & Ross. Thornton & Ross is one of the fastest growing companies in the UK pharmaceutical market (11 per cent sales growth over the previous year) and will clearly strengthen Stada Arzneimittel's UK footprint.

Another familiar industry boogeyman, the patent cliff, drove the $225m acquisition of Bocca Pharmacol by Qualitest, the generic arm of Endo Health Solutions. The deal provides some protection for Endo's top-selling Lidoderm which accounted for 31 per cent of 2012 sales ($947.7m). Endo follows many a large pharma company down this well trodden path. Novartis, Sanofi and GSK have all built up generics and consumer health franchises to claw back sales lost to generic rivals.

In its deal with Pernix Therapeutics, Breckenridge Pharmaceutical adds further generic assets including 11+ ANDAs and 7 previously marketed products, covering solid oral products and unique dosage forms, to its already 70+ marketed products.  The $30m price tag will no doubt go some way to offset the cost of Pernix' 2012 expansion programme acquiring four companies at a cost of $130m.

In Russia debt burden and the need to re-structure drove Pharmacy Chain 36.6 to sell a 52 per cent stake in Veropharm, one of Russia's largest pharmaceutical manufacturers, to GardenHills for $151m.

Biologics – still a honey trap
If the buzz surrounding the BMS, Roche and Merck clinical stage cancer immunotherapy programmes is anything to go by this is the next big advance in cancer therapy. All three companies have recently unveiled clinical studies in this space demonstrating efficacy in end-stage patients with difficult-to-treat tumours, including metastatic melanoma and non-small cell lung cancer. These programmes involve “anti programmed cell death monoclonal antibodies” (PD-1 mABs), which suppress tumour-initiated defence mechanisms and allow the immune system to recognise and destroy cancer cells.
It seems both AstraZeneca and Bayer also want to join the party with both companies buying into the space in August.

Bayer is in for the long haul as exemplified by its collaboration and licence agreement with Compugen. This partnership will cover the research, development, and commercialisation of antibody-based therapeutics against two undisclosed, novel checkpoint regulators. Compugen will receive an upfront payment of $10m, $530m+ in milestones and mid to high single digit sales royalties. Importantly success will also validate Compugen's computational approaches to identify mAB targets, which it has long pursued.

With one of the weakest industry pipelines, AstraZeneca cannot afford such patience. The $500m acquisition of Amplimmune marries well with Medimmune's existing commitment to cancer immunotherapy, which includes not only the anti-PD1 mAB MEDI-4736 but also tremelimumab (CLTA-4 mAB) and an anti-OX40 mAb.  Amplimmune brings multiple early-stage assets including:

• AMP-224, the phase Ib Fc-fusion protein targeting PD-1 partnered with GSK
• AMP-110, the IND stage Fc-fusion protein partnered with Daiichi Sankyo targeting the TH1/Th17 pathway
• AMP-514, another PD-1 mAb currently in late-stage preclinical, and
• Additional preclinical molecules targeting the B7 pathways.

The third biologics deal this month involves a licence agreement between ImmunoGen and Lilly granting Lilly rights to use the maytansinoid-based Targeted Antibody Payload (TAP) technology to develop and commercialise products directed to a specific antigen target on an exclusive basis and is pursuant to the terms of their existing 2011 partnership. ImmunoGen will receive development, regulatory and sales milestones potentially totalling $200.5m. The technology enables the development of “armed” antibodies to deliver potent cell-killing agents to cancer cells, sparing nearby healthy cells.  Proof-of-concept has been established with Genentech's Kadcyla currently marketed in the US.

A minor diversion
And finally deviating from our customary practice, a mention of a deal with undisclosed financial terms, namely the three year, preclinical collaboration between Johnson & Johnson, the University of Leuven and the Wellcome Trust. The aim is to develop treatments for dengue fever, the fastest-spreading tropical disease. This is most prevalent in tropical cities, afflicting approximately 390 million people annually, but as a result of climate change is now spreading to southern European and US cities. Symptoms include severe fevers, pain and rashes and even death. The work will focus on a series of highly potent, novel, anti-viral compounds that block replication against all four serotypes of the Aedes aegypti mosquito-borne virus. The deal includes an upfront payment as well as potential milestone payments and royalties.

See a table listing all the major pharma mergers, acquisitions and collaborations agreed during August 2013

Article by
Margaret Beer

Margaret has over 25 years wide-ranging research and commercial experience in various senior positions within the healthcare industry. She joined the Medius team following her departure from Merck & Co where she was responsible for the oversight and strategic direction of Merck’s licensing and partnering operation in Europe. She is a graduate of Reading (BSc) and London (MSc) Universities and has carried out post-graduate work at Stanford University, The London Business School and The Judge Business School, University of Cambridge. She is the author of 66 scientific publications in peer reviewed journals and some 50 abstracts presented at national/international scientific conferences.

12th September 2013

Article by
Margaret Beer

Margaret has over 25 years wide-ranging research and commercial experience in various senior positions within the healthcare industry. She joined the Medius team following her departure from Merck & Co where she was responsible for the oversight and strategic direction of Merck’s licensing and partnering operation in Europe. She is a graduate of Reading (BSc) and London (MSc) Universities and has carried out post-graduate work at Stanford University, The London Business School and The Judge Business School, University of Cambridge. She is the author of 66 scientific publications in peer reviewed journals and some 50 abstracts presented at national/international scientific conferences.

12th September 2013

From: Research, Sales

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