Pharma deals during August 2014

August brought a mixed bag of deals covering several therapeutic areas (oncology, CNS, diabetes, respiratory, allergies, dermatology), modalities (small molecules, biologics, RNA, stem cells), technologies (platform and therapeutic), drug delivery, formulations, diagnostics, generics and many deal types (acquisitions of companies, products and royalties, options, licences and even a termination).

Roche – in and out and round about
Following on from last month's $1.73bn acquisition of Seragon Pharmaceuticals, Roche seems to be in mood-swing mode backing out of one deal, entering into two new deals and seemingly unable to clinch or decide against the biggest deal of all, that to acquire the remaining (40%) stake in Chugai Pharmaceuticals. Rumours of a $10bn Chugai bid have swirled for weeks but to no avail. Is this another example to add to Roche's reputation of “walking away rather than overpay”?

Instead came the news that Roche had beaten a host of companies including Sanofi, GSK, Actelion and Gilead in the acquisition of InterMune for $8.3bn ($74.00 a share, representing a very respectable 63% premium). This brings a much needed boost to its respiratory portfolio, which currently consists of Pulmozyme (cystic fibrosis) and Xolair (severe asthma) and products in clinical development, eg lebrikizumab (severe asthma).

The prize: the FDA designated “breakthrough therapy” pirfenidone (Esbriet), an orally active small molecule, anti-fibrotic agent that inhibits the synthesis of both TGF-beta and TNF-alpha.  Pirfenidone is under regulatory review in the US and approved in Europe and Canada for the treatment of idiopathic pulmonary fibrosis (IPF), a relatively rare but progressive, irreversible and ultimately fatal lung scarring condition for which there are no approved drugs in the US. It also has potential utility in treating systemic sclerosis-related Interstitial Lung Disease. The drug is predicted to take a 50% share of the estimated $2bn IPF market, the main competitor being Boehringer Ingelheim's nintedanib currently in late stage development.

InterMune is also developing a pirfenidone analogue to treat specialty fibrotic diseases and has other small molecule research programmes targeting IPF and other orphan fibrotic diseases. 

This is Roche's largest acquisition since 2009 when the remaining stake in Genentech was acquired and may well have put paid to plans to fully acquire Chugai.

August also saw Roche's pRED group acquire Santaris Pharma for $450m - $250m upfront and $200m contingent on predetermined research milestones. Santaris' LNA (locked nucleic acid) platform claims to overcome the delivery challenges that have dogged antisense and siRNA technologies for years; it claims not only to be able to “ silence" mRNA and microRNA but, unlike siRNA approaches, it can also “correct” RNA, expanding the “undruggable” target's range.  The unique combination of small size, high binding affinity and metabolic stability enables LNAs to achieve cellular access without the need for complex delivery vehicles. Clearly it has not taken Roche long to be convinced of these claims given its $10m discovery alliance with Santaris was announced in January of this year. This deal on top of the 2013 $392m ISIS deal clearly signals that Roche's interest in RNA-based drugs has been reignited.

Not all planned alliances however run a smooth course as was the case with the Chiasma/ Roche $600m commercial agreement for Octreolin, the orally acting acromegaly drug. Despite favourable phase III results, following consultation with regulators Roche has pulled the plug. Chiasma will soldier on regardless hoping to release the drug by 2015.

More than one way to skin a cat – or deliver a molecule
Not all have given up on tackling the thorny issue of siRNA/ mRNA delivery as illustrated by the acquisition of Alpine Biosciences by the oncology specialist Oncothyreon. This was a share exchange deal (approximately 10% Oncothyreon fully-diluted common stock valuing Alpine at approximately $27m). The draw - Alpine's Protocell nanoparticle technology platform based on a silica core and a supported lipid surface layer, which is able to encapsulate large quantities of nucleic acids, proteins, peptides etc and deliver them in a highly-targeted fashion, both to specific cells and to organelles within cells. Oncothyreon's specific interest is in utilising the technology for cancer/ cancer immunotherapy therapeutics.  Partners to exploit the potential in other areas such as gene therapy, siRNA and mRNA therapy, enzyme replacement etc will be sought.  Oncothyreon's clinical stage pipeline includes the immunotherapy candidates tecemotide (phase III - Stage III non-small cell lung cancer) and ONT-10 (phase 1 - solid tumour treatment), and the only HER-2 small molecule inhibitor in clinical development, ONT-380 in phase Ib for metastatic breast cancer.

Oncology remains ever popular…
Oncology remains a firm favourite when it comes to attracting partners with six deals announced this month. These include the usual sprinkling of small molecule (Millennium/ Infinity, Hanmi/ Luye, Ziopharm/ Solasia) and antibody (Emergent/ Morphosys) approaches but also more alternative approaches as exemplified by the Gamida/ Novartis agreement.

Novartis came close to acquiring Gamida Cell, a leader in stem cell expansion technologies for $600m ($170m upfront) last year, but not quite. Interest clearly remained resulting in the investment and option to acquire agreement announced in August whereby Novartis will pay just $35m for a 15% stake in Gamida whilst retaining the option to acquire the remaining equity for $600m, part as a $165m upfront payout with the rest dependent on milestones, including phase 1/2 success. The option expires in the first half of 2016.

NiCord a novel stem cell treatment is derived from a single cord blood unit and is expanded and enriched with stem cells using Gamida Cell's proprietary Nicotinamide (NAM) technology. It is currently being investigated as the sole stem cell source in a phase I/II study to treat haematological malignancies such as leukaemia and lymphoma and also paediatric sickle cell disease.

… with CNS in hot pursuit
Five of the announced deals involved CNS targets with again both conventional and alternative approaches in the mix.

The highest value CNS deal was the exclusive licence agreement collaboration between Daiichi Sankyo and Charleston Laboratories, a company that specialises in drugs that reduce side effects associated with opioid analgesics and other products. The companies will co-develop and commercialise novel, fixed-dose hydrocodone combinations for pain relief and opioid-induced nausea and vomiting (OINV) in the US. Among the drugs is CL-108 a fixed-dose, bi-layered tablet combining immediate-release promethazine with a modified release hydrocodone and acetaminophen. CL-108 has recently successfully completed a phase 3 study in the treatment of moderate to severe acute pain and the reduction of OINV.

Under the terms of the agreement Charleston will receive an upfront payment of $100m plus $100m tied to an undisclosed near-term milestone and $450m to future approved novel fixed-dose hydrocodone products. Charleston will receive escalating, tiered, double-digit royalties.

An appetite for less conventional approaches to the treatment of CNS disorders is exemplified by the acquisition of the neuromodulation company Sapiens by Medtronic for $200m. Sapiens is developing a Deep Brain Stimulation (DBS) system that features 40 individual stimulation points designed to allow more precise targeting. This should reduce procedure time and stimulation-induced side effects and has utility in conditions such as Parkinson's disease and essential tremor. This acquisition will compliment and strengthen Medtronic's neuromodulation leadership position in the areas of chronic pain management, common movement disorders, spasticity and urologic and GI disorders. 

The growing interest in neuromodulation is also highlighted by St Jude Medical's acquisition of NeuroTherm earlier this month giving access to its radiofrequency ablation technology allowing minimally invasive procedures to reduce chronic pain in the neck and back.

Will the fools or angels win out?
The prospect of lost revenues resulting from Lantus' tumble off the patent cliff next year seems to be sufficient motivation for Sanofi, one of the leading pack diabetes drug companies, to ignore any lurking concerns caused by Pfizer's woeful experience with inhaled insulin (Exubera) and jump into this precarious game with MannKind. 

Having said that nerves must still be twitching given the relatively modest $150m upfront payment and MannKind's 10-year struggle to get Afrezza to this point. The long process involved three FDA approval attempts and MannKind will need to exercise patience with the promised profit share down the line.

The deal, a global licence to develop and market Afrezza, comes less than seven weeks after FDA approval was finally achieved, albeit with regulatory restrictions. The drug-device combination consists of a dry formulation of fast-acting human insulin delivered through a small, discreet inhaler for use at meal times to improve glycaemic control in adult patients with type 1 and type 2 diabetes.

As well as the $150m upfront MannKind will receive up to $775m in milestones and a 35% profit share on sales. Peak sales predictions range from $600m to $1bn. Perhaps it will take Sanofi's marketing might to overcome the boxed warnings, risk of acute bronchospasm and the memories of prescribing physicians to realise the higher end.  MannKind can only hope. The planned launch is the first quarter of next year. 

The second diabetes deal this month is ViaCyte's rights agreement with Janssen. This is also the second deal involving stem cells to be announced this month. Janssen is a long-standing investor in ViaCyte and this additional $20m ensures a future stake in the company and the right to acquire VC-01, a stem cell derived islet replacement therapy for insulin-dependent diabetes. VC-01 is a combination product consisting of pancreatic progenitor cells derived from proprietary human embryonic pluripotent stem cells which are encapsulated in ViaCyte's proprietary Encaptra device.  The product has recently secured IND status. When implanted under the skin, the cells mature and further differentiate into insulin-producing beta and other endocrine cells that regulate blood glucose in a manner similar to normal islet cells. 

The e-world invasion
Finally, although not areas normally covered in Deal Watch, both the number and value of several deals outside pharma are worthy of mention. These include Cerner's $1.3bn acquisition of Siemens' Health Information Technology unit and Venn Life Sciences' majority acquisition of Cardinal Systems and its Data Management and Randomisation Systems for $900m. As in all other spheres of life we predict the electronic age and all that is associated with it will increasingly creep into pharma deal making activity going forward.

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