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Pharma deals during August 2012

In this regular review of deals we focus on transactions announced during August 2012

Pharma deals August 2012In this regular review of deals we focus on the transactions announced during August 2012.  As usual for this series of articles we review those deals where financial terms are disclosed.

August is traditionally a quiet time for deals. This year with the big acquisitions of Human Genome Sciences by GSK having been completed and the BMS / Amylin deal closing on August 9 at a value of around $5.3bn [$31 per share], one would quite expect a quiet month.

Our table of the high valued deals reflects this but interestingly the reported deals come from all areas of the industry – covering OTC rights, agrobusiness and drug delivery.  The majority of these deals illustrate a theme of consolidation rather than adventurous moves into new fields.

Topping the table was the two agreement alliance extension between Allergan and Molecular Partners. Covering the discovery, development and commercialisation of DARPin products, Molecular Partners received upfront fees of $62.5m. The two agreements consist of an exclusive license to MP0260 [a dual anti VEGF-A/PDGF-B DARPin] and back ups; the second is an exclusive discovery alliance against selected targets implicated in serious eye disease.

Second in the table was the classic global licence and development deal between Genmab and Janssen Biotech [part of J&J] for daratumumab [HuMax – CD-38], which was announced at the end of the month. Daratumumab is in development for multiple myeloma and Genmab receives an upfront payment of $55m as well as an equity investment of about $80m for 5.4m new shares at a price of DKK 88 per share. In addition the agreement commands tiered double digit royalties and up to $1bn in milestone payments. As GSK is a key partner for Genmab through its relationship on Ofatumumab this deal gives the company other options for the future.

Continuing the trend for acquisitions and also consolidation in generics, Cinven built on its investments in generics businesses by buying up the equity in Mercury Pharma [formerly known as Goldshield] from HgCapital. Valued at $732m this reflected a quick turn around for HgCapital who had acquired the company in 2009.

Similarly, Dainippon Sumitomo's subsidiary, Sunovion [formerly Sepracor] snapped up Elevation Pharmaceuticals with an initial payment of $100m with a further $90m in research milestones and $210m in commercial milestones, with another $30m for new products.  This deal builds on the company's position in respiratory diseases.

Not confined to company acquisitions, the acquisition trend has continued this month with product acquisitions as well. GSK elected to divest to Aspen some of the older products in its portfolio for £172m for sales of A$127.4 (£82.7m), which represents 2.1 x sales.

However the sales are likely to continue declining because of the mandatory annual price cuts instigated by the Australian government. Based on first half 2012 sales of A$47.4m (£30.8m), there was a reduction in sales of 33 per cent against the previous year, the sales/price ratio is now 2.8.

This deal follows on from that reported in December 2009 when Aspen gained a licence to sell GSK products in South Africa with the acquisition of 8 brands and a factory in Germany. At the time Aspen issued GSK with 68.5m shares (taking GSK's total shareholding to 19 per cent of the company). As Aspen is the major generic player in Australia this represents a viable generics strategy for GSK in this market.

Another option for off patent strategy is of course to go OTC and Pfizer has paid around $250m to acquire the global OTC right to AstraZeneca's Nexium. AstraZeneca will continue to manufacture the Rx version with Pfizer anticipating starting marketing in 2014 when patent cover expires.

Illustrating the more frequently made choice to acquire rather than license, MEI Pharma acquired Pracinostat, an HDAC inhibitor [histone deacetylase inhibitor] which has phase II clinical data available for treatment of myelofibrosis. Initially a paper deal, MEI will issue $500,000 of common stock but there are downstream payments of up to $75.2m. This deal reflects the fact that this is a very competitive area and it is hoped that Pracinostat will prove to be best in class.

Regional deals remain a feature for August with the Kamada/Chiesi, Nanobiotix/PharmaEngine, Alfa Wasserman/Salix and Farma-Projekt/Recordati deals all focused on specific territorial rights. It is interesting to see the value placed on gaining the exclusive distribution rights for the inhaled alpha-1 antitrypsin product from Kamada in Europe, Turkey and CIS. Fitting well into Chiesi's respiratory franchise, the deal includes milestones payments of $60m.

More consolidation was seen through the restructuring of the agreement between Ipsen and Inspiration. The original partnership which started in 2010 is focused on the development and commercialisation of OBI-1, a recombinant porcine factor VIII in haemophilia. Ipsen made a payment of $30m in exchange for the recovery of rights to OBI-1 and the grant of commercial rights to IB1001 with double digit royalties for each product. For those territories where Inspiration holds rights, the royalties due to Ipsen are in the mid twenties percent. A further investment by Ipsen of $20m is contingent on Inspiration raising further external funding.

Representing an early stage strategic alliance, the deal between Regulus and AstraZeneca commanded an upfront payment of $28m which includes an equity investment. This deal allows for collaboration on three microRNA targets including the lead microRNA-33 for atherosclerosis. No further details are available on the subsequent financial terms other than preclinical milestones are included. Our table for this month includes other deals where only the details of the upfront payments have been disclosed.

Adding to our smorgasbord of deals this month is an academic: industry deal between the University of Pennsylvania and Novartis and also a drug delivery deal between Depomed and J&J. Novartis will contribute $20m for this exclusive global deal to develop and market cellular immunotherapies using chimeric antigen receptor [CAR] technologies in cancer.  The agreement includes the usual elements of research funding, milestones payments and royalties.

Depomed licensed the rights to it Acuform gastric retentive delivery system to Janssen Pharmaceuticals on a non exclusive basis and received a $10m upfront payment. In addition to the low single digit royalty, there is the payment of a one off sales-related milestone due.

Concluding our review is the acquisition by Alliance of products from AstraZeneca UK. Growth by the acquisition of old brands though is not always an easy route to profitability. Alliance has built its business by acquiring older brands but often older products suffer from declining sales therefore more acquisitions have to be made to maintain sales levels.

Sales for 2011 at £46m were nearly £4m or 8 per cent below 2010. Now in 2012 the first half sales were £22m (down 10 per cent on prior year) possibly because the supply of ImmuCyst from Sanofi was suspended.  It will remain a challenge to continue to acquire to fill the sales gap.

Licensor acquired / partner acquiror Deal type  Product / Technology Headline
$m
Molecular Partners / Allergan Alliance Development and commercialisation of DARPin products for serious ophthalmic disease 1,400
Genmab / J&J Licence Global rights to daratumumab including 10.7% equity stake 1,100
Mercury Pharma / Cinven Acquisition Acquisition of Mercury 732
Elavation Pharmaceuticals/ Sunovion Pharmaceuticals Acquisition Inhaled solutions for chronic obstructive pulmonary disease 430
GSK / Aspen Pharmacare Divestment Divestment of classic brands in Australia 270
Rhizen / TG Therapeutics JV collaboration Global development and commercialisation of RP5264 a PI3K8 inhibitor for haematological cancers [plus back up compounds] 250
AZ / Pfizer OTC rights Pfizer acquired OTC rights to Nexium 250
S*BIO / MEI Pharmaceuticals Acquisition Pracinostat an oral histone deacetylase [HDAC] inhibitor 75.2
Kamada / Chiesi Distribution Exclusive distribution of inhaled alpha 1 antitrypsin in Europe, Turkey and the CIS 60
Nanobiotix/ PharmaEngine Partnership Exclusive rights to develop and commercialise NB TXR3 in Asia Pacific region 57
Inspiration / Ipsen Restructuring of agreement Ipsen gains rights to IB1001 and OBI-1 in Europe, Russia, China, Australia 50
Alfa Wasserman / Salix Licence Exclusive licence in the US and Canada for extended release rifaximin  35
Alnylam / Monsanto Strategic alliance RNAi IP to deliver biological solutions in agriculture 29.2 (a)
Regulus Therapeutics / AZ Strategic alliance  MicroRNA therapeutics against CVS, oncology and metabolic targets 28 (a)
Farma-Projekt / Recordati  Acquisition Recordati acquires the Polish company 21
University of Pennsylvania / Novartis Licence Exclusive global research and licensing of novel cellular immunotherapies using chimeric antigen receptor technologies in cancer 20
Depomed / J&J Licence Non exclusive licence to Acuform drug delivery technology in US Canada and Japan 10 (a)
AZ UK / Alliance Pharma Plc Acquisition Alliance acquired three anti malarial products from AZ 8

All deals are global unless otherwise stated

(a) headline fee is based on upfront only, no other financial information available

 Sharon Finch

The Author

Sharon Finch is a consultant at Medius Associates 

6th September 2012

From: Research, Sales

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