Pharma deals during November 2012

As is customary, this month's deals focus on those with disclosed financial terms.  November saw acquisitions back with a vengeance with eight of the 10 highest value deals falling into this category.  The remaining deals are a mixed bag including research collaborations, a part equity investment, a patent settlement, a public-private partnership and a write-off.  Of particular interest is Pfizer's increasingly creative approach to funding early stage research.

Selecta and Sanofi join forces
Top of the leaderboard this month is the exclusive, global collaboration between Selecta Biosciences and Sanofi based on Selecta's synthetic vaccine particle (SVP) platform.

Specifically, the collaboration is to develop and commercialise a tolerogenic, antigen-specific immunotherapy against an undisclosed, life-threatening food allergen and an option to develop two additional immunotherapeutic candidates for food or airborne allergens. The SVP technology uniquely engineers biodegradable nanoparticles to create synthetic vaccines with fully integrated components, including antigens and adjuvants.  It is claimed to specifically target immune cells and to facilitate an optimal immune response. 

Selecta is eligible to receive several pre-clinical, clinical, regulatory and sales milestones totalling $300m for each immunotherapy, plus up to double-digit tiered royalties for each commercialised immunotherapy.

Diversification from an unexpected player
The highest value acquisition announced in November was BASF's plan to buy the omega-3 fatty acid research, development and manufacturing company Pronova BioPharma in a cash buyout valued at $845m.  Pronova supplies the active ingredient in GSK's triglyceride lowering omega-3 drug Lovaza and, in addition, is developing competitor formulations – the most advanced being PRC-4016 for dyslipidaemia.

All may not be plain sailing with this BASF strategy however given the promise of a crowded market place with the anticipated introduction of Amarin's Vascepa next year, to be closely followed by Omthera Pharmaceuticals' Epinova, not to mention the growing concerns regarding the health benefits of premium priced prescription omega-3 fatty acids.  Perhaps this is reflected in an offer that corresponds to a 24 per cent premium on Pronova's average six month share price and values the company at about 5.7 times annual earnings.

BASF's strategy is to become less exposed to the volatility of its core chemicals / plastics business. This deal following on from the acquisition of Equateq, a maker of concentrated omega-3 fatty acids in May catapults BASF into a leading position in the global omega-3 fatty acid market.  

Generics – always a safe bet
Two generics companies were confirmed acquisition targets in November.  Veropharm, one of the largest generics companies in the fast-growing Russian market has, not surprisingly, been the subject of interest from companies such as GSK and Stada for some time.  It is currently majority owned by Russia's largest drugstore chain “36.6” and has enjoyed 20 per cent growth for each of the last two years, with prescription drugs accounting for most of the expansion.

However, Russia's AFK Sistema, which already owns the small pharma firm Binnofarm, has Russian Federal Anti-Monopoly Service approval to acquire Veropharm in a deal estimated at $253m to 636m if Sistema buys 36.6's 51.8 per cent stake, plus that of minority shareholders.

The second generics acquisition is the offer of $215m by India's Cipla for a 51 per cent stake in South Africa's third largest drug company Cipla Medpro, again driven by a fast growing market.

Dermatology - a firm favourite
Following the recent acquisitions of Medicus Pharmaceuticals, Melville and Fougera Pharmaceuticals by Valeant, Novartis and Sandoz respectively dermatology and skincare companies continue to be an irresistible attraction.

Perhaps reacting to the disappointing sales of the Lap-Band medical device for obesity, not to mention the mounting safety concerns, Allergan is returning to its comfort zone with the acquisition of SkinMedica. SkinMedica's topical aesthetics skincare business includes a variety of "physician dispensed" non-prescription and prescription products that sit more comfortably with Allergan's “wrinkle reducers” Botox and Juvederm. The Colorescience aesthetic make-up line will be spun out and is not to be included in the deal.

Under the terms of the agreement that is expected to close later this year, Allergan will pay SkinMedica $350m up-front and an additional $25m contingent on sales targets being met.

India's top drugmaker Sun Pharma also wants a piece of the dermatology action as exemplified by the acquisition of DUSA Pharmaceuticals at a total cash value of $230m representing a 38 per cent share premium.  The purchase of DUSA, a US-based market leader in photodynamic therapy, gives Sun access to the US skin treatment market and complements the dermatology business of its Israeli subsidiary Taro Pharmaceuticals. The key prizes: DUSA's FDA approved Levulan combination therapy, used to treat non-hyperkeratotic actinic keratosis of the face or scalp, and BLU-U, used to treat moderate inflammatory acne vulgaris.

Pfizer – more than one way to skin a cat
Pfizer is clearly thinking outside the box with respect to funding its R&D ambitions by announcing two less than typical deal arrangements in November.

The first is a public-private partnership between Pfizer, AstraZeneca (AZ) and the Québec government to set up a Montreal-based, not-for-profit, life sciences research centre to be known as the Neomed Institute.  The Québec government will contribute $28m, AZ $35m and Pfizer $3.5m.  Interestingly AZ's contribution includes the IP to three proprietary pain molecules and projects.  A total of $100m will be invested over five years. The centre will bridge the gap between early-stage research and later-stage drug development and is no doubt welcome news to the Montreal community where many pharma research jobs have been cut in recent years.

In a second Pfizer deal announced this month, this time with a not-for-profit organisation, the pharma giant is unusually the recipient of funding.  The Cystic Fibrosis Foundation Therapeutics (CFFT) has agreed to invest up to $58m over six years to expand its drug development partnership with Pfizer's FoldRx Pharmaceuticals.  The funding will support pre-clinical research into drugs targeting the most common mutation of CF, Delta F508.

This triggers a mis-folding of the cystic fibrosis transmembrane conductance regulator protein preventing its migration to the cell surface resulting in an inefficient flow of salt and fluids into the airways and hence the formation of thick secretions.  CFFT will support proof-of-concept studies; Pfizer will be responsible for clinical development.

Devices - a sign of the times?
Unusually a deal between two medical device companies is included in this month's Deal Watch partly due to the growing holistic approach of large pharma companies and our prediction that medical devices will increasingly feature in deals going forward.  The acquisition of Vessix Vascular by the medical devicemaker Boston Scientific was the third largest value November deal.  The product at the heart of the deal is the “V2”, a catheter-based renal denervation system for the treatment of uncontrolled hypertension.

The V2 is one of 5 hypertension-treating devices with a CE mark and will compete with Medtronic's “Symplicity” (acquired from Ardian for $800m) and Covidien's “OneShot” (acquired from Maya Medical for $230m).  All these devices, deaden renal artery nerves and thereby facilitate a blood pressure reduction, however the “V2” device is claimed to be seven times faster than the market-leading “Symplicity”.  The deal comprises an upfront payment of $125m and sales milestones to a maximum of $300m over a 5 year period.

Takeda's insatiable appetite
The three Takeda deals reported in last month's Deal Watch were not enough to quench the thirst of Japan's largest pharmaceutical company.  The final acquisition to make it into this month's “top 20” is Takeda's purchase of Envoy Therapeutics.  This deal, valued at $140m, includes an undisclosed upfront fee and progress-dependent, pre-clinical milestone payments.

Takeda is very familiar with the contents of Envoy's portfolio, which includes the proprietary bacTRAP technology as well as pre-clinical CNS assets including programmes for Parkinson's disease and cognitive impairment associated with schizophrenia, since it already has a 12.5 per cent stake in the company and an ongoing research collaboration. The bacTRAP technology which combines genetic engineering and molecular biology techniques allows the in vivo identification of cell type specific proteins and hence is especially powerful in the brain where hundreds of cell types are intermingled.

Wright gambles on BioMimetic
Finally, in a brave move, November saw the orthopaedics company Wright Medical make a move on the regenerative medicine company BioMimetic Therapeutics, before the final FDA approval of the lead product Augment Bone Graft.  This is a recombinant human platelet-derived growth factor used to replace autologous bone grafts in foot and ankle fusions.  Wright will pay $190m upfront in a cash-and-stock deal representing a 56 per cent premium plus $190m contingent on milestones. The deal is set to close early 2013.

All deals are worldwide unless otherwise noted:

*  Russian market
**  South African market
***  Canadian research facility
+  South Korea market
++  Pursuant to the collaboration agreement, NeuroVive will grant Sihuan an exclusive licence to develop, market and sell CicloMulsion® and NeuroSTAT® in China
 
The Author
Margaret Beer of Medius Associates