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Deal Watch May 2016

Novartis, Quintiles and Sanofi are among those featured in this month’s round-up of pharma deal activity

Medius Deal WatchIf you can't stand the heat, stay out of the kitchen …
Rapidly approaching mid summer and the weather here in the UK is not hot but certainly the deal climate is sizzling! Looking at the key trends in the deal landscape, restructuring is still very much on the agenda. Not under pressure as are GSK and Pfizer, Novartis announced the separation of its pharmaceuticals division into two business units: Novartis Oncology and Novartis Pharmaceuticals. The pharmaceuticals company will include Novartis' other interests in CNS, ophthalmology, respiratory, cardiomet, immunology and dermatology.

Doing the complete opposite and consolidating, Quintiles and IMS Health announced the merger of their respective businesses to form a mega-CRO with a combined market capitalisation of $17.6bn. In the same vein, focusing its interests, Bayer put in a $62bn opening bid [$122 per share] to purchase Monsanto, which bid has been rejected as insufficient. It is thought that Bayer can run to as much as $140 per share and rumours are abounding about a sale of its animal health interests to support the acquisition. This would be in line with the long standing advice of build up or exit for Bayer's animal health.

It's not over until the fat lady sings…
Against this back drop of asset switching, there are still struggles to close the mega-deals and the Medivation acquisition saga rolls on. Following its rejection of the $9.3bn [$52.5 per share in cash, ~36% premium] on the table from Sanofi, Medivation is now open to bids, encouraging competition. Many companies are rumoured to have an interest including Celgene, Gilead, Pfizer, Amgen, Novartis and AstraZeneca. In the light of this, Sanofi has elected to go hostile and has filed with the SEC seeking to replace Medivation's current board with independent candidates. The prize of course is the one marketed product in Medivation's portfolio, Xtandi [enzalutamide for the treatment of advanced prostate cancer] with sales estimated to reach $1.5bn and already outperforming J&J's Zytiga [abiraterone].

The relentless commitment to deals reflects the fall from grace of investment for in-house R&D. A recent analysis through 2015 made by EvaluatePharma shows that six of the top ten pharma companies will derive less than 20% of drug sales from products that were developed from their own stable.

Topping this month's DW table with a headline value of $5.2bn is Pfizer's takeover of Anacor Pharmaceuticals which exemplifies this trend. Paying a 55% premium at $99.25 per share, the acquisition brings crisaborole, a topical PDE4 inhibitor for mild to moderate atopic dermatitis (eczema) with estimated peak sales of $2bn. Crisaborole is currently under FDA review.

Late stage deals are not, however, a complete panacea. This month brought in a gentle reminder that deals cannot completely de-risk the pharma business even when the dossier is with the FDA for review. Two big headline deals appeared to come unstuck as the FDA failed to grant approvals. Teva's drug SD 809 for the treatment of Huntington's disease was part of the acquisition of Auspex at a cost of $3.5bn. Originally reported in DW Issue 57 [March 2015], Teva paid a 42% premium to acquire the company, which included other pipeline assets besides SD 809. No additional clinical studies have been requested, but the FDA has asked for a review of the blood levels of certain metabolites.

And Teva is not alone in its disappointment. With the rush to obtain proof of concept, manufacturing is often a Cinderella activity but if neglected it can have significant ramifications. AstraZeneca was also on the receiving end of bad news when the FDA issued a complete response letter [CRL] for the ZS-9 NDA for the treatment of hyperkalemia. The CRL refers to a manufacturing issue. ZS-9 was acquired when the company purchased ZS Pharma for $2.7bn. Reported in DW Issue 65 [November 2015] AstraZeneca had out bid Actelion who were also in the running to buy ZS Pharma at that time.

The manufacturing CRLs have been out in force and AstraZeneca is not the only company on the receiving end with OPKO receiving a CRL earlier in the year [March] in relation to deficiencies at the plant operated by Catalent [its CMO]. The presence of the CRL on the books however did not deter Vifor Fresenius Medical Care Renal Pharma's decision to license Rayaldee [a vitamin D prohormone treatment] from OPKO paying $50m upfront. Vifor has secured a wide range of territories in the deal, including Europe, Canada, Mexico, Australia and South Korea plus an option to US marketing rights for the treatment of dialysis patients. Financial terms include $52m in R&D milestones, $180m in sales based milestones and tiered double digit royalties.

Universities join the top dogs!
Bringing in a headline that a big pharma would be proud of, the University of Pennsylvania closed a $2bn headline deal with Biogen for the development of gene therapies to treat eye, skeletal muscle and central nervous system disorders using adeno-associated virus (AAV) gene delivery vectors. Under the terms of the agreement Biogen has the option to rights to the University's next-generation AAV vectors and in return the University receives an upfront payment of $20m plus $62.5m in R&D funding with a minimum of $77.5m in milestone fees per programme plus royalties.

In the ever popular oncology field, Chugai has signed up with Osaka University for a multiyear investment worth $91.1m to focus on the development of treatments for cancer and the immune system. This follows a similar collaboration between Takeda and Kyoto University signed in April 2015 with $268m going into stem cell treatments.

Away from the main headlines… some creative deals
This month saw the announcement of several restructured agreements with sufficiently large fees to warrant a place in our top 20. Building on its 2014 deal with MacroGenics, J&J entered into a licence and collaboration agreement for MGD015 for B-cell malignancies with an upfront fee of $75m and $665m in milestones payments. With double-digit royalties, the deal terms include an option to co-promote in the US and an option to fund some of the late-stage clinical development costs in exchange for profit sharing in the US and Canada.

The second reconfigured agreement was that between Celgene and Agios with the ever creative Celgene making an upfront payment of $200m for a pipeline focusing on metabolic pathways in immuno-oncology. Agios leads the early-stage research, Celgene has an option at preclinical phase with an option fee due of $30m. There is cost sharing co-development with Agios able to secure up to $169m in R&D milestones. Celgene then has a one off option to select a single metabolic immuno-oncology programme, with a 65/35% split of the profits/costs plus up to $209m in milestones. If any inflammation or autoimmune products emerge from the deal, Agios may secure $386m per product in milestones, with tiered royalties on sales. The agreement can be extended by two years for an additional fee.

Well known for its immuno-oncology collaborations with the major pharmas, Incyte announced the acquisition of Ariad's pan-European team [comprising 125 medical, sales and marketing personnel] providing a clinical development and marketing base for future European launches. In addition Incyte was granted an exclusive licence to Inclusig [the only approved BCR-ABL inhibitor with activity against the T315I mutation approved in Europe for chronic myeloid leukaemia (CML) and acute lymphoblastic leukaemia (ALL)] in Europe and other selected countries. With a headline value of $140m out-licensing the European rights will enable Ariad to focus on Iclusig in the US.

Another deal which has taken a hybrid licence / acquisition format is that between the Australian biotech, Prima Biomed and US company Sydys. Prima has partnered its immuno-oncology CVac in ovarian cancer by transferring its CVac related assets, including manufacturing protocols, clinical data, patents and know‐how plus certain assets e.g. equipment and inventory into Sydys. In place of an upfront payment Prima receives a 9.9% equity stake in consideration for the transfer of assets. Sydys is effectively repurposing into a clinical stage biotech company to develop CVac and, on successful commercialisation, Prima could receive $293m in milestone payments with low single digit royalties.

Falling by the wayside
With options proving such a popular component in current deals, it is worth a pause for thought as to the possible downside. This month GSK elected not to currently proceed with its option to Ionis Pharmaceuticals' IONIS-TTRrx, which was about to enter into phase 3 clinical development. The knock on effect for Ionis shares was a dip by a significant 40%. Evidence of thrombocytopenia in the phase 2 studies clearly influenced the decision not to proceed.

Similarly, Bristol-Myers Squibb has called time on its deal with Biocon for IN-105/Tregopil [oral insulin]. Under a deal forged in November 2012, BMS had an option to worldwide rights outside India exercisable on the successful completion of phase 2 trials. This follows the divestment of the BMS diabetes products to AstraZeneca some three years ago. Given the cost of the clinical studies going forwards, Biocon will now be seeking a new partner.

New CRISPR tech deals
After investing $335m in research support for a JV with CRISPR Therapeutics to discover, develop and commercialize new therapeutics to cure blood disorders, blindness, and congenital heart disease late last year, Bayer announced another gene editing pact this month with ERS Genomics. Bayer and ERS signed a patent licence agreement giving Bayer access to ERS' CRISPR-Cas9 genome-editing patents. Financial details were not disclosed. Like CRISPR Therapeutics ERS Genomics holds rights to the foundational CRISPR-Cas9 patent portfolio from Dr. Emmanuelle Charpentier, one of the inventors of the breakthrough gene-editing technology.

Earlier this month another CRISPR-Cas9 company, Intellia Therapeutics, raised $108m in an IPO to progress its early-stage programmes. This follows the $94m IPO of Editas Medicine in February this year.

Not only but also…
To close this month a recent report from the UK government expresses concerns about the lack of investment in anti-infectives R&D. Warning that by the year 2050, drug resistant bacteria could kill one person every second across the world, the UK Review on Antimicrobial Resistance recommends a "pay-or-play" system. It is suggested that those companies that do not engage in antimicrobial R&D would be fined 0.25% of sales turnover which would be put into a fund. From this fund, rewards of as much as $1.3bn would be made for successful development projects. It will be interesting to see if this carrot and stick approach gains acceptance.

Licensor/ Acquired Acquirer/ PartnerDeal TypeCommentsHeadline $m
Anacor/ PfizerCorporate acquisitionAcquisition for $99.25 per share [55% premium], includes crisaborole under FDA review for mild to moderate eczema; est peak sales $2bn
Univ Pennsylvania/ BiogenLicenceGene editing and therapy using AAV vectors; $20m upfront, $62.5m in R&D funds, $77.5 -$137.5m m/s per programme; option to license next generation AAV vectors
Celator/ JazzCorporate acquisitionAcquisition for $30.25 per share brings Vyxeos [nano scale liposomal formulation of cytarabine /daunorubicin] for AML, completed P3
Renaissance/ MylanAsset acquisitionAcquisition of 25 branded and generic topical products
950+ contingent 50
WaVe Life Sciences/ PfizerLicence and collaborationNucleic acid therapies for metabolic disorders using stereopure platform; $40m upfront includes $30m equity, option to up to 5 programmes
The Medicines Company/ ChiesiProduct acquisitionAcquisition of cardiovascular assets Cleviprex, Kengreal and rights to Argatroban
MacroGenics/ J&JLicenceSecond bispecific molecule, MGD015, to an undisclosed target; $75m upfront
Agios/ CelgeneAgreement extensionNew collaboration/ amendment to 2010 deal - Agios receives $200m research fees; options to programmes, co-development and co-commercialisation rights
Xenoport/ Arbor PharmaceuticalsCorporate acquisitionAcquisition for $7.03 per share [60% premium]; includes Horizant [gabapentin] for restless legs
Prime European Therapeuticals/ Albany Molecular ResearchCorporate acquisitionAcquisition of API and custom manufacturer
Smith & Nephew/ MedtronicAsset acquisitionS&N's gynaecology business includes Truclear power morcellation hysteroscopic uterine tissue removal system
Prima BioMed/ Sydys CorpLicence/ spin outCVac immuno-oncology assets; Prima receives a 9.9% equity stake with downstream milestones and royalties
OPKO Health/ Vifor FreseniusLicenceRayaldee in EP, CA, Mexico, Australia, S. Korea and other markets for secondary hyperparathyroidism in CKD; includes option to acquire US rights for treatment in dialysis patients
Carna Biosciences/ ProNAi TherapeuticsLicence$0.9m upfront for global rights to AS-141, a small molecule kinase inhibitor targeting CDC7
Galapagos/ AbbVieAgreement extensionCystic fibrosis alliance for development of a triple combination therapy; increase in milestones from $350m to $600m
Jubilant Biosys/ Checkpoint TherapeuticsLicencePatents covering BRD4 [BET domain] inhibitors in oncology; $2m upfront
Ariad Pharm/ IncyteAcquisition and licenceAriad's European operations; $140m upfront with tiered royalties on European sales of Iclusig
Galil Medical/ BTGCorporate acquisitionCryoablation products for treatment and palliative care of kidney and other cancers; $84.5m upfront and up to $25.5m in milestones
CSPC Pharmaceutical/ Watson [Allergan]LicenceExclusive rights ex-China to an undisclosed cancer generic product
Turing/ Marina BiotechAsset acquisitionIntranasal ketamine programme for 53m Marina common shares, plus milestones and single digit royalties

*per programme and depending on programme focus

Sharon Finch, the founder of Medius, has extensive business development experience working both in industry and for over 20 years with Medius. Sharon works primarily on partner searches and transactions.

10th June 2016

10th June 2016

From: Sales



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