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Pharma deals during January 2014

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

Deal watch

January is often a quiet month in the deal calendar as many companies target deal closure for the calendar year end.  As usual, this month's Deal Watch reviews the top value deals reported during January, which in number were very much on a par with January 2013.  In line with our customary practice, this report focuses predominantly on those deals where financial terms are disclosed. 

Almost right to the end of the month, the big headline deal was that of Forest with its planned takeover of Aptalis. Aptalis itself was only formed in 2011 following the acquisition of Eurand by the Montreal based Axcan Pharma. Forest will be paying $2.9bn in cash for this acquisition thus acquiring a gastrointestinal (GI) franchise and cystic fibrosis treatments, primarily in North America and Europe. The European infrastructure will certainly complement Forest's business but as Aptalis has manufacturing sites in Canada and the US there may be some overlap. Aptalis brings sales revenues of $688m through its leading products, Canasa (mesalamine_, Carafate [sucralfate] and Zenpep [pacrealipase] which together account for 60 per cent of Aptalis's turnover.

However, January's top deal position was overtaken by the deal reported between Dainippon Sumitomo Pharmaceuticals (DSP) and Edison Pharmaceuticals. This deal is in fact an extension of the original strategic alliance closed in March 2013 which granted DAP rights to develop Edison's drugs EPI-743 (in orphan paediatric mitochondrial disease) and EPI-589 (in adult CNS disease) for Japan only. With a headline value of up to $4.295bn the amendment allows for the inclusion of North American commercial rights.

But, this is a very big number, so how does it stack up? As noted, the original 2013 deal was for Japan only with a headline value then of $545m. The value put on the Japanese rights thus provided a benchmark for the North American rights. Based on the development milestones, North America is worth double the value of Japan presumably reflecting the relative market sizes. Under the 2013 deal DSP made an upfront payment of $35m with $15m in R&D costs, plus development milestone payments per indication of $10-35m and up to $460m in sales milestones. 

This amended deal now reflects those terms but with development milestones of $30m to $105m per indication for EPI 589 with double-digit royalties on sales and sales milestone payments. The commercial milestones for EPI 589 plus three other novel compounds account for up to $3.86bn in total. 

In the new joint research agreement DSP will work to discover 10 NCEs using Edison's discovery platform which brings a $10m upfront and $40m for R&D support. DSP gets exclusive rights (in Japan and North America) plus milestones and double-digit royalties. 

Finally DSP is also investing in Edison through a $50m stock purchase with an optional )at Edison's request) additional $50m between the 1st and 5th anniversaries of the initial equity closing.  It will be interesting to see if anyone tops this headline later in the year but the reality is that the majority of this headline remains completely contingent. 

RNAi deals
January also saw the continuation of a few themes from 2013; firstly the activity in and around RNAi.  Our table includes four RNAi-based deals, so are we seeing a resurgence of interest in this field?

One of the key players was Alnylam which had double news to impart last month. Firstly, there was the acquisition of Merck's subsidiary, Sirna Therapeutics for $175m upfront in cash and equity. The deal comprised a range of RNAi assets including pre-clinical candidates, IP and delivery technologies. Merck had originally acquired these assets with its purchase of Sirna back in 2006 paying a high price tag of $1.1bn to acquire the business with what was thought at the time to be key IP.  

The other deal announced by Alnylam was the expansion of its deal with Sanofi (Genzyme unit_ to develop RNAi therapeutics in rare diseases. Sanofi has invested in the company to the tune of $700m in return for a 12 per cent equity stake. The original deal was forged back in 2012 when Genzyme gained access to patisiran for the treatment of transthyretin familial amyloid polyneuropathy in Japan and other Asian markets. The now expanded deal grants Genzyme rights in all markets outside North America and Western Europe. At a share price of $80 per share this represents a +21 per cent premium.

Major pharma positioning
The New Year seems to have encouraged companies to turn out their portfolios and shape up for future business. Several major pharma firms are deciding where to focus their business interests with Pfizer spinning out Zoetis for its animal health interests and Abbott doing the same for its pharma business, now AbbVie.

Currently rumours abound that discussions are ongoing between Novartis and Merck, with the expectation that there may be an asset swop forthcoming; Merck considering exchanging its OTC business for Novartis's vaccines and animal health interests. The actual mechanism of the swap is not yet clear but it could be in a partnership or even a joint venture. 

Divestments
This month also saw the ongoing theme of big pharma making divestments of non-core interests and businesses. The Merck & Co divestment of Sirna is noted above but, this month, Shire announced the divestment of Dermagraft (a bioengineered skin substitution product for diabetic foot ulcers) to Organogenesis. Originally acquired as part of the Advanced BioHealing business purchased for $750m, this will be recorded as a $650m loss, which is not insignificant. No upfront payment is being made for this transaction but it does carry up to $300m in milestones if certain commercial targets are met before 2018. The deal is cited as being the divestment of a non-core loss making asset, the product performance was poor.

Slimming the business down a little, Actavis sold some of its generic products in France, Italy, Spain,  Portugal, Belgium, Germany and the Netherlands to Aurobindo for $41m. Actavis aims to focus its  resources to support investment in faster growing markets, including Central and Eastern Europe and Southeast Asia. Reflecting the emerging market difficulties highlighted in our ADW, Actavis has confirmed that it will be ending its presence in China due to the difficult business climate.

Terminations
Not surprisingly after the report of the failure of drisapersen in showing improvement in its phase III six minute walking study in Duchenne muscular dystophy, GSK announced the return of the drisapersen rights to Prosensa. GSK had secured the rights in 2009 at a cost of $25m upfront and $655m in milestones.

Duchenne muscular dystrophy seems to be a bit of a development graveyard for companies. In 2008 Genzyme gained rights to ataluren from PTC Therapeutics at a cost of $100m. Ataluren was in clinical development for the treatment of Duchenne muscular dystrophy caused by nonsense mutations.  But again, a similar failure in a six minute walking study in phase IIb halted its development.  So in September 2011 Genzyme returned the rights to the compound outside of the US and Canada to PTC while seeking an option to indications other than Duchenne/Becker.

Acquisitions
Finally, there is the continuing roll out of acquisitions, not all of which are for the big headline dollars.  An interesting biotech:biotech deal was the acquisition of Trianta by Medigene, although the value at $8m does not feature in our top table. Biotech:biotech deals are curious because as a general rule, they do not deliver the cash and expertise required to take the parties forward but they do offer a potentially  stronger portfolio and in some cases a synergistic platform, as well as a means to maximise the use  of cash reserves. As the positive buzz from the US IPO market has not reached Europe yet, biotech:biotech deals may be a more appropriate solution. Another option, open to some European companies, is to raise cash in the US, for example, in early January GW Pharma raised $87.9m on NASDAQ. 

Appearing mid-table this month was the acquisition by Par of JHP for the headline value of $490m.  This purchase brings the JHP range of speciality injectables into the Par portfolio.

Milestone reporting
Reporting on the achievement of milestones tends these days to make up an increasing part of the deal news flow. This month several companies managed to secure additional revenues via this route as noted below.

Licensor

Licensee

Product / technology

Headline ($m)

Prothena
Roche
Anti-trust clearance of the upfront fee for the deal to access MAbs
involved in protein misfolding and cell adhesion in Dec 2013
30
Heptares
Medimmune
Successful delivery of StaR proteins thermostabilised G protein-coupled receptors [GPCRs]
Not disclosed
AdamasForest
Completion of studies for the NDA of a fixed dosed combination of Namenda and donepezil, Forest has exclusive US commercialisation rights
40

So it looks as though 2014 has got off to a promising start in terms of number, value and breadth across a wide range of companies and products. It will be interesting to see if this will be continued for the rest of the year.

See a table listing all the major pharma mergers, acquisitions and collaborations agreed during January 2014

Article by
Sharon Finch

Sharon is an associate at Medius Associates.

14th February 2014

Article by
Sharon Finch

Sharon is an associate at Medius Associates.

14th February 2014

From: Research, Sales

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