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Pharma deals during December 2014

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

deal watch image mergers acquisitions pharma

As 2014 drew to a close there was no let up in the appetite for acquisitions within the industry.  Merck & Co was particularly active in M&A in December 2014 announcing the acquisitions of Cubist and oncology company OncoEthix. Also on the acquisition trail were Otsuka and Roche buying into CNS products for diseases with high unmet need and bispecific antibody technology, respectively.

J&J has been busy entering into licences and research collaborations on the one hand, while exercising an opt-out and terminating its $945m anti-inflammatory deal with Astellas that was signed in 2012. Pfizer and Lilly have also been particularly active in entering into licences and establishing collaborations during December.

Merck & Co - acquisition spree

Merck completed its $3.85bn acquisition of Idenix Pharmaceuticals and its clinical stage portfolio of hepatitis C therapies in August for $24.50 per share cash and at a huge 240% premium. In early December, Merck added more weight to its anti-infectives portfolio by announcing the acquisition of Cubist for $102 per share, a premium of around 37%. The deal is valued at some $9.5bn, which includes an equity value of $8.4bn and $1.1bn of debt. 

While many companies over the years have dropped by the wayside in their activities in the antibacterial arena, Cubist's attention has been solely on the discovery and development of novel antibiotics with particular focus on resistant and difficult to treat bacterial infections. Cubicin (daptomycin for injection), the company's lead product, was approved in 2003 and is now indicated for a range of infections. These include Complicated skin and skin structure infections (cSSSI) caused by Gram-positive bacteria such as Staphylococcus aureus (including methicillin-resistant isolates, MRSA) and various Streptococcus and other species. Cubicin is also approved for the treatment of bacteraemia caused by MRSA and methicillin-susceptible Staphylococcus aureus (MSSA). The drug had net product revenues in 2013 of $908m.

deal watch table 

Cubist itself has been growing over the last few years with a number of acquisitions. In July 2013 it acquired both Optimer Pharmaceuticals for $801m and Trius Therapeutics for $818m and their respective portfolios of antibacterial therapeutics. The Optimer acquisition brought to Cubist an approved antibacterial drug for the treatment of Clostridium difficile-associated diarrhoea (CDAD) called DIFICID (fidaxomicin).  

Cubist's acquisition of Trius Therapeutics brought a late-stage antibiotic candidate, tedizolid phosphate, as well as several preclinical antibiotic programmes. Approved in 2014, tedizolid phosphate (Sivextro) is for the treatment of adult acute bacterial skin and skin structure infections (ABSSSI) caused by susceptible Gram-positive bacteria, including MRSA. 

Acquisitions are frequently complicated by external factors and a day after the Merck acquisition was announced Cubist lost its Cubicin patent infringement lawsuit against Hospira in the US. Under this ruling, four out of five Cubist patents protecting Cubicin were invalidated. One patent was upheld, which means that Hospira is barred from selling its generic version of Cubicin until that patent expires in June 2016.  While clearly the prospect of generic competition around two years earlier than expected is not great news for a product that brings in 80% of Cubist's revenues, Merck is undeterred. Merck's focus is on the long-term value that it can create through Cubist. Buoyed with the news in mid-December of the FDA approval of another Cubist antibiotic, Zerbaxa (ceftolozane/tazobactam), for the treatment of various Gram-negative bacterial infections, it looks as if Merck means to maintain its leading position in the anti-infectives area.

Meanwhile in oncology, Merck & Co has acquired Swiss-based OncoEthix for $375m, comprising an upfront payment of up to $110m with contingent clinical and regulatory milestones of up to $265m.  OncoEthix was founded in 2009 and its lead product is OTX015, a phase Ib stage, oral small molecule inhibitor of BET bromodomain proteins 2/3/4 (BRD2/3/4) being developed for haematological malignancies and advanced solid tumours. OTX015 was originally in-licensed from Mitsubishi Tanabe Pharma Corporation in March 2012 following completion of phase I studies in healthy volunteers.

J&J - deals with an early stage focus

J&J focused on some early stage deals during December. In the $700m deal with Macrogenics, J&J's Janssen Biotech secured global rights to a preclinical stage bispecific antibody, MGD011, which is based on the Dual-Affinity Re-Targeting (DART) platform. The antibody targets both CD19 and CD3 and is being developed for the treatment of B-cell malignancies. In addition to the upfront payment of $50m and $575m in potential milestones with double-digit royalties on net sales, J&J is also making a $75m equity investment in Macrogenics. While J&J will be fully responsible for the clinical development of MGD011, the deal structure offers Macrogenics some flexibility downstream; it may contribute to funding the late stage clinical development in exchange for a profit sharing in North America and it has an option to co-promote in the US.  

Continuing on the antibody theme, J&J/ Janssen also signed up to a collaboration with Sevion Therapeutics to access the biotech's spatially addressed library platform for the discovery of antibodies against multiple undisclosed targets. The Sevion platform enables the discovery of antibodies against proteins that cannot be easily purified in functional form, such as transmembrane targets. As part of the collaboration Janssen will have an option to license selected candidates for development and commercialisation, in which case Sevion could receive milestones totaling up to $125m with low single digit royalties on net product sales.

Switching to drug delivery technologies, J&J/Janssen entered into a global licence with Halozyme Therapeutics to access Halozyme's ENHANZE technology, which is designed to enable subcutaneous administration of injectable drugs. The deal focuses on up to five undisclosed Janssen molecules and brings Halozyme an upfront of $15m and up to $566m in development, regulatory and commercial milestones.

Based on a recombinant human hyaluronidase enzyme (rHuPH20) that temporarily modifies hyaluronan, a component of the extracellular matrix, ENHANZE can aid the dispersion and absorption of injected therapeutic drugs. The technology has the potential to be used to develop new subcutaneous formulations of certain molecules that could only be administered intravenously. Halozyme's approach has already been validated through its relationship with Roche. Subcutaneous formulations of both MabThera and Herceptin based on the Halozyme technology have been launched by Roche.

Established products - novel delivery

The drug delivery theme continues with three other deals in this month's deal table. Eli Lilly signed two licences this month for products developed utilising drug delivery technologies. The first with French company Adocia focuses on the development of BioChaperone Lispro, which is a phase Ib stage ultra-rapid insulin incorporating Adocia's BioChaperone technology for the treatment of type 1 and type 2 diabetes. The BioChaperone platform technology is based on innovative polymers, oligomers and small organic compounds that form a physical complex with proteins, thereby protecting them from enzymatic degradation and also enhancing their performance. BioChaperone Lispro has the potential to allow greater flexibility in the timing of insulin injections in diabetic patients, lower variability of post-meal blood glucose elevations, lower rates of hypoglycemia and better overall glucose control. In return for the licence, Adocia will receive $50m upfront with up to $280m in development and regulatory milestones and up to $240m in sales milestones, with tiered royalties on sales.

Lilly's second drug delivery-based deal of the month is the $440m licence with Alza spin-out Zosano Pharma for ZP-PTH, a phase II formulation of parathyroid hormone 1-34 (PTH) delivered using Zosano's microneedle patch system for the treatment of osteoporosis. As part of the consideration, Lilly will make an equity investment of up to $15m in Zosano at the time of Zosano's IPO (which was postponed in August) with regulatory approval milestones totalling up to $300m and sales milestones up to $125m. In what appears to be a very back loaded deal, Zosano is also eligible to receive double digit royalties on sales in major markets and will receive reimbursement of all manufacturing costs.

Pfizer has also signed up to a drug delivery product this month through its $570m licensing deal with Opko Health for a long acting version of human growth hormone (hGH), which is currently in phase III trials for the treatment of growth hormone deficiency (GHD). This product, named hGH-CTP, was in the portfolio of Prolor Biotech which Opko acquired in August 2013 for $480m. The CTP technology is a protein modification technology in which a naturally occurring peptide, the carboxy terminal peptide (CTP) of the beta chain of human chorionic gonadotropin, is attached to a protein to extend its circulatory half-life. This has the potential to reduce the dosing frequency of hGH from a daily injection to a once weekly injection.

The upfront payment of $295m from Pfizer will go some of the way to recoup the price Opko paid for Prolor. Opko could also receive $275m in regulatory milestones. The royalty arrangements are perhaps somewhat unusual in that Opko is eligible to receive initial royalties associated with the commercialisation of hGH-CTP for adult GHD but for paediatric GHD, the royalties will transition to gross profit sharing for both hGH-CTP and Pfizer's Genotropin. In this way Opko's income is linked to the performance of Pfizer's hGH franchise rather than solely to the product it has out-licensed, which must be the best of both worlds.

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

Article by
Jo Ogden

Jill is an associate at Medius Associates. She has over 27 years of commercial and R&D experience in the biopharmaceuticals and healthcare industries and provides our biologics, early stage deals and platform technologies expertise. She has worked for a number of mid-caps and biotech companies, both public and private. Jill has led and been involved in a wide range of product and technology deals, including corporate M&A.

8th January 2015

Article by
Jo Ogden

Jill is an associate at Medius Associates. She has over 27 years of commercial and R&D experience in the biopharmaceuticals and healthcare industries and provides our biologics, early stage deals and platform technologies expertise. She has worked for a number of mid-caps and biotech companies, both public and private. Jill has led and been involved in a wide range of product and technology deals, including corporate M&A.

8th January 2015

From: Research, Sales



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