Deal Watch March 2017

Each month the Deal Watch team ploughs our merry way through the details of 600 plus deals to bring you the edited highlights. This March the total number was high (well over 700), but the number of interesting and valuable deals was the lowest we have seen in a year (see table 1). In particular the largest deal this month, between MedImmune and Sanofi Pasteur, has a headline figure of $650m, a figure which would have had the deal struggling to get into the top 10 in the previous three months. Indeed, only 10 deals are at the $100m and above level and this month’s Top 20 includes deals with single figure headlines.

Table 1: Total value of Top 20 deals per month ($m)

Notwithstanding the paucity of mega-deals this month, there are a number interesting insights to be gained from the deals that have caught our attention so read on!

The Year of the Rooster
In China, this is the year of the Rooster and we have just completed month 2 of the Chinese calendar.This is a lucky month for Roosters which might explain why we have so many deals emerging from China this month. In particular, the third largest deal of the month is a joint venture between the research-based biotechnology company, BeiGene, which focuses on immuno-oncology, and the Guangzhou Development District. The agreement, worth $330m, will build BeiGene Biologics in Guangzhou, creating a biologics hub there and a company focused on the development and manufacturing of biologics. Sihuan Pharmaceuticals, a leader in China’s cardio-cerebrovascular area, has acquired the manufacturer Ambest Pharmaceuticals, with its portfolio of injectable products, for $160m. Shanghai Fosun has reached outside China to acquire Breas Medical Group, a Swedish company with a portfolio of home care medical devices for conditions such as sleep apnoea and chronic obstructive pulmonary disease (COPD).Shanghai Fosun has paid $90m to acquire a majority interest in Breas from PBM Capital Group with the aim of expanding Breas’s presence in Asian markets. And finally, Xynomic, the US/China biopharmaceutical company has picked up two products: ACAT-1 from the US company Resarci Therapeutics and abexinostat from a mystery seller who Xynomic declined to name. (Abexinostat was formerly in development by Pharmacyclics (now owned by AbbVie) and Servier.) Both ACAT-1 (for which Xynomic paid $1.2m upfront with another $59m in potential milestones) and abexinostat are HDAC inhibitors for solid and haematological tumours.

X-Chem does it again. Twice. In Japanese.
X-Chem is a name that comes up with great regularity in the Deal Watch database. Anyone who is anyone appears to have been beating a path to the door of this private US company with its DNA-encoded libraries of small molecules: DEX. The DEX technology platform enables the discovery of novel lead compounds from its library of 120bn small molecules with a greater rate of success than other methods, and the deal with Astellas covers multiple therapeutic areas. Astellas’s upfront payment is $16m, with preclinical, development and commercial milestones of over $100m per target, plus royalties. Clearly on a roll with Japan, X-Chem has also signed a deal with Ono Pharmaceutical covering oncology targets.

However, X-Chem is not the only company doing deals in drug discovery. Editas Medicine has entered a strategic R&D alliance where Allergan has exclusive access to Editas’s CRISPR genome-editing programmes in ocular health, as well as options to license up to five programmes, including the lead product, LCA10, which is currently in preclinical development for Leber Congenital Amaurosis. Allergan has paid $90m upfront and there are further milestones on LCA10. BMS has expanded its 2014 agreement with CytomX Therapeutics to access up to eight further targets in oncology and other fields, using CytomX’s Probody platform. This technology enhances the tumour-targeting features of antibodies so that they are inactive until they reach the tumour microenvironment. BMS has paid $200m upfront and CytomX is eligible for development, regulatory and commercial milestones of up to $448m, making this the second largest deal of the month.

Where have all the licences gone?
Licensing is our business, and each month we look particularly carefully at these deals. But this month there seem to be fewer and they are smaller than usual. In our Top 20 we have only three: Alexion in-licensed the lipid nanoparticle (LNP) technology from Arbutus Biopharma to use as a delivery technology for an mRNA rare disease product candidate for $7.5m upfront and up to $75m in milestones. Resarci out-licensed ACAT-1 to Xynomic, as detailed above, and Daiichi Sankyo paid $4m upfront, committed $8m in research funding and further research, development and commercialisation milestone payments for the rights to Heptares’ G protein-coupled receptor product for pain relief. There are more below the radar (without accompanying numbers), for example: Valeant has granted Glycyx a sublicence to develop products containing methylnaltrexone bromide for oncology indications, and Fuji Pharma has obtained the rights in Japan and ASEAN, from the Belgian company, Mithra, to commercialise Donesta, an oral treatment for post-menopausal women suffering from dyspareunia (painful intercourse).

By contrast, as well as five company acquisitions, there are a couple of product acquisitions in our Top 20, which might start to explain where the licences are going. Among the company acquisitions, Sartorius paid $320m in cash to acquire the cell-based assay company, Essen BioScience; Otsuka paid $100m in upfront payments and will pay up to $150m in contingent payments for the ADHD company Neurovance; Shanghai Fosun paid $90m for a majority interest in Breas (see above); Ascendis Health paid R375m ($29m) for the Southern Africa operations of Cipla India, and BioLineRx paid $6m for the immuno-oncology company, Agalimmune.

Vertex paid $160m in cash to Concert Pharmaceuticals to purchase the assets of CTP-656, and could pay an additional $90m in milestones based on regulatory approval and reimbursement. CTP-656 is a CFTR potentiator in development as part of a combination regimen in cystic fibrosis patients. The other asset purchase agreement was made by PTC Therapeutics, who acquired Emflaza, a steroid approved for Duchenne Muscular Dystrophy, from Marathon Pharmaceuticals for $140m upfront ($75m in cash and ~$65m in PTC equity), with a single sales-based milestone of $50m.

Alt-deals
In a reversal of the usual trend where large companies, experiencing a dearth of innovation, seek it out from small companies, this month we are seeing a significant number of deals where the larger companies have out-licensed products to smaller companies. PureTech Health has entered an agreement with Novartis to advance two clinical stage programmes in the field of immuno-senescence. The products have completed phase IIa studies and PureTech has created a subsidiary, resTORbio to develop the two compounds. Novartis has received equity in resTORbio and is eligible for milestone and royalty payments on the products. PureTech has put $15m into resTORbio and may allocate a further $10m to the programme.

Duchesnay, the Canadian women’s health company, has acquired from Shionogi the rights to market Osphena, another oral treatment for dyspareunia, in North America. Merck KGaA has partnered its product M1095 (ALX-0761), for plaque psoriasis, to Avillion. In this agreement, Avillion will develop the anti-IL-17A/F nanobody through phases II and III of development and up to registration. Another such deal has been done by AstraZeneca, who has entered a strategic collaboration with Circassia Pharmaceuticals. In order to focus its respiratory resources on products such as Symbicort and benralizumab, AstraZeneca has agreed that its product Tudorza (marketed for COPD) and Duaklir (in phase III for COPD) will be promoted in the US by Circassia. AstraZeneca will complete the development of Duaklir (for which Circassia will contribute $462.5m) and will manufacture and supply the products. AstraZeneca gains an equity stake of $50m in Circassia and will gain $100m on the earlier approval of Duaklir in the US or by 30 June 2019. If Circassia sublicenses the rights to Tudorza in the US, it will pay a further $80m. AstraZeneca is also eligible for milestones on US sales.

Deal on hold
In an unusual development, the recent licensing deal between Immunomedics and Seattle Genetics, whereby Seattle Genetics is to pay $250m in cash, up to $1.7bn in milestones, and royalties, has been put on hold by the Delaware Court of Chancery. The activist investor venBio, which has recently gained control of Immunomedics’ board, filed the suit on the grounds that Immunomedics did not permit sufficient time for counterbids for the rights to sacituzumab govitecan after announcing the deal with Seattle Genetics. Sacituzumab govitecan has been awarded breakthrough therapy status by the FDA. Given the length of time that deals take, we are not sure that the 30-day hold will be sufficient to bring in another suitor.

And that’s the news from the Deal Watch team, where the women are strong, the men are good looking and ALL the deals are above average.

(With apologies to Garrison Keillor’s Prairie Home Companion and Lake Wobegon Days.)

Global, unless noted
*  China
** US
*** Southern Africa

10th April 2017