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Pharma deals during November 2014

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

deal watch image mergers acquisitions pharma

After the surprise of AbbVie walking away from its deal with Shire in October, last month we had the excitement of Actavis beating off Valeant to buy Allergan for a whopping $66bn. There are also another eight deals with headline values over $1bn as companies look to reshape, divest, focus and consolidate.  We have also seen a couple of deals continuing the trend of acquisition of royalty streams and priority review vouchers. By far the most common therapeutic area this month has been oncology with five deals in our top 20.

The wait is over

At $219 per share Actavis is paying a 88% share premium over the price of Allergan's shares on April 10 this year (the last date before Valeant's ally Pershing Square crossed the 5% threshold which kicked-off Valeant's seven month pursuit of Allergan). The $66bn was believed to be a step too far for Valeant as CEO J Michael Pearson said he “couldn't justify” the $66bn price tag – representing over a 20% uplift to his last offer of $54bn.

Allergan held out for its white knight with the commitment that the combined company will spend $1.7bn in R&D investment (~7.3% of the $23bn in combined revenues for 2015). This is less than the 20% seen in other parts of the industry, but not so unreasonable as half of the combined company's sales will be in generics. This is considerably higher than the R&D-averse Valeant's 3%.

deal watch table 

In terms of running costs, Actavis is looking at a $1.8bn in savings, with the majority realised in the first year after closing. This is much less than the $2.7bn in annual costs targeted by Valeant (with 80% of that squeezed within the first six months). Actavis' target includes about $450m in financial synergies in addition to the $475m cuts that Allergan announced in July; a move that was designed to fend off Valeant.

Back in the game

Not quite at the same eye watering level of bid premium, BioMarin has stepped in to buy Prosens for $680m in cash while offering up to an additional $160m more in near-term milestones if drisapersen, the late-stage drug for Duchenne muscular dystrophy (DMD), secures “early” approval. Early is defined as a US approval by May 15 2016 and a European approval no later than February 15 2017.

BioMarin is paying $17.75 per share, which represents a 55% bid premium, and in the weeks following the announcement of the deal, Prosensa's price rose to a high of $20.31 before settling at around $19.00.   Prosensa has been busy since drisapersen failed a pivotal phase III for DMD (failure to beat a placebo in significantly improving boys' ability to complete a six-minute walk test) and the rights were returned by GlaxoSmithKline in January 2014. It undertook fresh analysis of new extension study data that backed a hypothesis that providing the drug earlier while extending treatment could delay disease progression.   Following "positive" reviews with the FDA Prosensa has just begun a rolling submission of the application.  BioMarin clearly feels that there is still a real opportunity and is prepared to take on Sarepta and PTC Therapeutics in the competition to hustle ahead new DMD drugs to regulators.

Plenty more fish in the sea

While Valeant is busy licking its wounds - including organising a $2bn share buy-back, it's also understood to be eyeing other prey in the form of Zoetis who this month acquired Abbott's animal health business for $255m. Bill Ackman, a Valeant investor, now owns 8.5% of Zoetis, which may pave the way for a potential deal. However, once again Valeant may face some hurdles as Zoetis has adopted a poison pill defence and Bayer is also understood to have Zoetis in its sights. Bayer may need to complete its rumoured sale of its diabetes device business unit first. It's understood that a number of PE firms are set to acquire the diabetes portfolio, which includes Contour (the blood glucose meter) for $2.5bn. This would enable Bayer to continue to focus on strategic areas such as consumer health, which has already been bolstered by the acquisition of Merck & Co's consumer business in May for $14bn.

Bayer is not the only company targeting OTC; Perrigo announced the acquisition of the Belgian OTC company Omega Pharmaceuticals with its 2,000 product portfolio for $4.5bn. This follows Perrigo's acquisition of Elan in July last year for $8.6bn. Perrigo will fund 25% through equity to Omega's CEO Mark Coucke and cover the rest with cash and debt, taking on €1.1m of Omega's debt.

Divesting assets

November has seen a series of other companies who are understood to be shedding non-core businesses:

  1. Reckitt Benckiser (RB) is spinning out its pharma business unit, under the name Indivior. Analysts' valuations for the drug unit have ranged widely from £1bn and £4bn; recent estimates suggest the business is worth around £2bn ($3.2bn). RB investors will each receive one share in Indivior for each RB share they own, with trading in its shares scheduled for December 23. Indivior will not be without its challenges as sales of its off-patent opioid addiction treatment Suboxone continue to slump.
  2. Similarly UCB is understood to be selling its highly profitable generics business Kremers Urban Pharmaceuticals to Advent International and Avista Capital Partners for $1.53bn to allow it to focus on neurology and immunology and reduce debt load.

Flavour of the month

The therapeutic area of the year continues to be CAR-T (chimeric antigen receptor therapy). Leading the way this month is J&J's Janssen striking a deal with Transposagen Biopharmaceuticals to collaborate over the next three years on new CAR-T drugs; re-engineering T cells to include a chimeric antigen receptor so they can zero in on cancer cells. Along with an unspecified upfront, J&J will pay up to $292m per treatment in milestones, for all worldwide commercial rights. This month also saw CAR-T “wunder-kid” Juno Therapeutics achieve FDA “breakthough” drug status for its lead compound JCAR015, days after filing for a $150m IPO. JCAR015, in phase I, showed a "91% complete remission rate in 22 adult patients with relapsed/refractory (r/r) B cell acute lymphoblastic leukaemia (ALL). Historical complete remission rates without JCAR015 in a similar population are less than 10%."

Next steps for this technology will be looking at co-stimulatory domains CD28 and/or 4-1BB and side effects with bi-specific CAR-T looking to minimise off-target activity. Whatever CAR-T's promise, for the time being of course the chronic lymphocytic leukaemia company to beat is Pharmacyclics with Imbruvic (ibrutinib), its oral small molecule still proving remarkably resilient to competitor challenges.

As part of its defence strategy Pharmacyclics and its partner J&J continue to collaborate with players across the industry. In October we saw J&J/Pharmacyclics refresh their deal with BMS and last month the duo announced a collaboration with AstraZeneca (AZ) targeting haematological cancers. AZ has been busy this month and in the deal with J&J, AZ will match its closely-watched PD-L1 checkpoint inhibitor MEDI4736 with Imbruvica. MEDI4736 blocks the signals that help tumours avoid detection by the immune system, countering the tumour's immune-evading tactics. Ibrutinib blocks signals that tell malignant B cells to multiply and spread uncontrollably. Preclinical evidence suggests that their combination may lead to an enhanced anti-tumour immune response. Pharmacyclics will carry out phase I and phase IIa studies, but no financial terms were disclosed.

Whatever it takes

Interestingly, one of the main attractions of AZ for Pfizer was understood to be MEDI4736, as Pfizer wanted a big slice of the immuno-oncology pie, and so instead it has struck a deal with Merck KGaA. This deal gives Pfizer co-development and co-marketing rights to MSB0010718C, Merck KGaA's anti-PD-L1 programme in phase II. In securing this deal, perhaps as a sign of its desperation, Pfizer is paying a staggering $850m (the largest upfront in the industry's history, a title previously held by Celgene's $710m payout to Nogra for commercial rights on its Crohn's drug) and up to $2bn in milestones. In addition to launching combination studies using their existing cancer therapies, the companies will work together to push Pfizer's preclinical anti-PD-1 antibody into phase I. In addition Merck KGaA also gets the right to co-promote Xalkori in the US and other "key" markets.

In another approach to building an oncology powerhouse, AZ has acquired diagnostics company, Definiens, for an initial $150m with a series of undisclosed milestones. AZ plans to use Definiens' technology to develop better biomarkers for cancer to identify well-defined groups of cancer patients, thereby cutting the time and cost of new drug development through its highly precise predictive and prognostic biomarker testing.

AZ also announced a strategic alliance with ISIS Pharmaceuticals building on an existing collaboration between the companies, in the area of antisense oligonucleotide-based therapeutics and RNA biology. Initial project areas will be oncology and cardiovascular and metabolic diseases.

Good news at last

Days after finally getting the FDA's go-ahead to resume development of its lead candidate, imetelsta, for myelofibrosis and myelodysplastic syndrome, Geron has signed a deal with J&J, for a $35m upfront and promising up to $900m on undisclosed development, regulatory and commercial goals. With the two companies aligned, the plan now is to map out phase II studies and begin enrolment in 2015.  Separately, the companies are planning to launch an exploratory phase II trial in acute myelogenous leukaemia, to see if they can demonstrate a strong signal.

On a mission

Continuing its trend of helping companies monetise their future income streams, Royalty Pharma is buying royalties in Vertex Pharmaceutical's cystic fibrosis treatments from Cystic Fibrosis Foundation for $3.3bn in cash. The FDA approved Vertex's cystic fibrosis drug Kalydeco in January 2012. In another similar deal, PDL Biopharma acquired the 75% of the University of Michigan's worldwide royalty interest in Cerdelga (eliglustat) for $66m. Cerdelga, an oral therapy for adult patients with Gaucher disease type 1, was developed by Genzyme and approved by the FDA in August this year. It is currently under review by the EMA and other regulatory authorities. These transactions are seen as part of a growing trend in philanthropy called mission investing; instead of giving research grants, philanthropies act more like business partners and expect a share of profits arising from their gift.

In another interesting deal Gilead Sciences is paying Knight Therapeutics $125m in cash to buy Knight's priority review voucher (PRV) which can be used to speed up a future filing (from ten months down to six).  Introduced by the FDA in 2007, a PRV is an incentive for companies to invest in treatments for neglected tropical diseases.  One of 16 tropical diseases that qualify is leishmaniasis, for which Knight's Impavido (miltefosine) was approved in March by the FDA. Gilead has not yet disclosed its intended use for the PRV.

In 2012 the PRV programme was extended to include rare pediatric diseases. BioMarin was awarded a Rare Pediatric Disease PRV when it received approval of Vimizim, a new biological product for patients with Mucopolysaccharidosis type IVA. In July, BioMarin sold its PRV to Regeneron for $68m to expedite filing of its cholesterol drug, the PCSK9 inhibitor alirocumab, being developed in partnership with Sanofi. Selling PRVs is a relatively new area and so these two deals provide initial benchmarks, however it will be interesting to see how future PRV valuations develop.   

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

Article by
Bridget Lacey

Bridget brings to the Medius Associates team her international healthcare experience to deliver a strong commercial focus combined with excellent analytical skills and a focus on driving strategic portfolio and investment decisions and in delivering improved business performance.

9th December 2014

Article by
Bridget Lacey

Bridget brings to the Medius Associates team her international healthcare experience to deliver a strong commercial focus combined with excellent analytical skills and a focus on driving strategic portfolio and investment decisions and in delivering improved business performance.

9th December 2014

From: Research, Sales



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