Pharma deals during September 2013

As is customary this month's report focuses on deals with disclosed financial terms. Acquisitions continued to form a high proportion of the deals reported; nine out of the top 20 deals reported this month.

This follows on from the trend seen in the first half of 2013 with $29bn of M&A transactions in the first six months, putting 2013 on track to be the best year since 2010, according to Evaluate's Pharma Half-Year Review 2013.

This month's deals have strong international and regional flavours, with deals involving companies in across Europe, Africa, South America, US and Asia.

Oncology and rheumatoid arthritis (RA) deals dominated with a total of seven in the top 20 deals with a mix of product and platform technologies, as Big Pharma companies continued their quest to fill pipelines and stay ahead of the competition, but biotechs and mid-sized companies were also active.

Streamlining
Seven of the top eight deals were acquisitions, with GSK pocketing $2.8bn as a result of two streamlining activities. The larger of the two is the divestment of its Lucozade and Ribena brands to Japan's Suntory for $2.1bn, representing a multiple of 2.7x sales, 30 per cent higher than had been anticipated. GSK also received $700m from the sale of two thrombosis drugs (Arixtra and Fraxiparine), to Aspen Pharmacare, South Africa's largest drug maker. The deal included sales and marketing teams and a manufacturing plant in France. This agreement provides Aspen with the opportunity to expand into Russia and the CIS. It is synergistic with its recent acquisition of a Merck Sharp & Dohme (MSD/Merck & Co) API manufacturing plant in the Netherlands. As this plant manufactures the active ingredient for Fraxiaparine, Aspen will gain higher margins than GSK had been achieving. There is a similar story for Arixtra, as Aspen has bought-out a royalty stream relating to Arixtra from MSD.

Foreign intervention
Staying in South Africa; CFR Pharmaceuticals, Chile's largest pharmaceutical company, has announced the final terms for the acquisition of South Africa's Adcock Ingram for $1.3bn. Adcock's focus is on anti-retrovirals and generics and CFR plans to move some of its production to South Africa to take advantage of Adcock's under-utilised facilities and also to export some of Adcock's products to Latin America. However this deal is likely to face hurdles as the South African authorities will need to be persuaded that the benefits of selling a national asset to a foreign buyer, outweigh the concerns of loss of control of key domestic industries.

Similar concerns are faced by Indian authorities as KKR has announced its intention to acquire 40 pre cent of generics company Gland Pharma for around $500m. Gland, established in 1978, has a key position in India with low molecular weight heparin. This deal would follow Mylan's $1.6bn acquisition of Agila Specialities, which was finally approved in September but with a commitment from Mylan to maintain current production levels of drugs on the country's essential medicine list for the next five years.  

Focus on oncology
Within the oncology space the largest deal this month was Otsuka's acquisition of Astex Pharmaceuticals for $886m with Astex' shareholders earning an impressive 48 per cent premium. Otsuka is focused on filling the gap to be left once its leading product antipsychotic blockbuster Abilify, comes off patent, imminently. Astex' lead product is Dacogen (decitabine) for myelodysplastic syndromes (MDS). It was also recently approved for acute myeloid leukaemia (AML) in patients over 65 years of age in Europe. The lead pipeline candidates are SGI-110, a subcutaneous hypomethylating agent in multiple studies for a variety of haematological and solid tumour oncology indications, including MDS, AML, ovarian cancer and liver cancer, and AT13387, a second generation HSP90 inhibitor for the treatment of prostate and lung cancers.

Another oncology deal of note was AstraZeneca's (AZ) licence of Merck & Co's WEE1 kinase (MK-1775) currently being evaluated in phase IIa clinical studies in combination with standard of care therapies for the treatment of patients with P53-deficient ovarian cancer. AZ is keen to fill its pipeline and is paying an upfront of $50m (plus undisclosed development and regulatory milestones, sales-related payments and tiered royalties). WEE1 helps to regulate the cell-division cycle and MK-1775 is designed to cause certain tumour cells to divide without undergoing the normal DNA repair processes, ultimately leading to cell death. Preclinical evidence suggests that the combination of MK-1775 and DNA damage-inducing chemotherapy agents can enhance anti-tumour properties, in comparison to chemotherapy alone.

Roche has licensed two DNA immune-therapy vaccines targeting prostate cancer (INO5150) and Hepatitis B (INO-1800), plus the proprietary CELECTRA delivery technology, from Inovio Pharmaceuticals. In contrast to some of the vast upfronts being paid in some deals, Roche is only laying down a modest $10m upfront with up to $413m in milestone payments. Roche sees the potential to combine these therapies with other immunotherapies already in its oncology portfolio, such as MPDL3280A, which targets the PD-L1 receptor on cancer cells.  

Strengthening another of its business units, Roche's diagnostic arm announced a licensing deal with Pacific Bioscience for human in vitro diagnostic (IVD) gene sequencing technology, paying $35m upfront and additional $40m in milestones, plus Pacific Bioscience will receive an ongoing revenue stream from the supply of instruments, software and assay specific reagents on commercialisation.

Focus on rheumatoid arthritis
This month saw Merck Serono strike a new four-year research alliance with Ablynx on its nanobody platform across Merck Serono's portfolio; oncology, immuno-oncology, immunology neurology. The companies already have three other co-development arrangements since 2008. This time Merck Serono is paying an upfront of $15m and additional payments of upto $18m to total $33m. Ablynx will use this money to fund a dedicated unit to get programmes through to proof of principle.

Ablynx has also secured a licensing deal with AbbVie for development commercialisation rights to ALX0061, an IL-6R nanobody that has just completed a phase IIa study in RA. AbbVie are looking for a successor to its TNA-alpha inhibitor Humira, the world's top-selling drug, whose patent is set to expire in 2016. Anti-IL-6 antibodies are a proven mechanism of action for autoimmune diseases and ALX-0061 has shown potential in a phase IIa clinical trial. AbbVie has paid a whopping $175m upfront and upto $665m in milestones. Ablynx has also committed to starting clinical development of ALX-0061 in lupus, providing AbbVie with another data point for opting into full development. This deal is based on Ablynx' unique antibody approach, taking the smaller, simplified structures of camel and llama antibodies and repurposing them for work in humans.

This is not AbbVie's only insurance policy against Humira's patent expiry; it already established an RA collaboration with another Belgian company, Galapagos, in February 2012. This deal is for a JAK1 inhibitor (GLPG0634). With both ALX-0061 and GLPG0634, AbbVie looks to be challenging two recent entrants to the RA space: Roche's IL-6 monoclonal antibody (MAb) Actemra and Pfizer's JAK inhibitor Xeljanz.

This month AbbVie reunited with Galapagos and set up a global alliance to discover, develop  and commercialise novel potentiator and combination therapies for cystic fibrosis, focusing on the main gene mutations seen in the disease, F508del and G551D. AbbVie paid an upfront fee of $45m with Galapagos eligible to receive a further $360m in developmental, regulatory and commercial milestones.

Continuing in the RA space is Baxter's exclusive collaboration with Coherus Biosciences, a biosimilar company, to develop and commercialise a biosimilar to etanercept (Enbrel). Baxter will pay $30m upfront and upto a further $216m in payments contingent on development and regulatory milestones. This deal comes in the same month as the EU approved Hospira's Inflectra (infliximab), as a direct competitor to reference medical product Remicade (2012 European sales of more than $2bn).  This is Europe's first biosimilar mAb therapy. Inflectra has been approved for the treatment of inflammatory conditions including RA.

Cementing relationships
Merck Serono and Ablynx are not the only companies deepening their relationship with a fourth deal; Biogen Idec and Isis Pharmaceuticals have a similarly intense relationship with four deals in two years. Their latest deal is a six year strategic alliance to use Isis' antisense technology in the CNS space. Biogen has agreed to pay an enormous upfront of $100m with upto additional $220m in milestone payments, licence fees and royalty payments for all treatments developed through this collaboration. Antisense technology is designed to alter a gene's function, silencing a mutation or activating a gene to compensate for an underlying genetic defect. When the genetic sequence of a gene is known to cause a disease, it is possible to synthesise a strand of nucleic acid that binds to the messenger RNA produced by that gene and effectively turn that gene "on" or "off." As part of the six-year research collaboration, Biogen Idec will gain exclusive rights to the use of Isis' antisense technology to develop therapies for neurological diseases.

Final thoughts…
The rumour mills have been in overdrive this month as speculation rises as to which of several biotechs specialising in the orphan drug space is the biggest target. Alexion, Biomarin and ViroPharma have all been under the spotlight this month as speculation shifts from large Pharma looking to get in on the action or an existing niche player making a move… watch this space.

Staying in the orphan space, it is always good to hear of past deals progressing … Novartis has taken up its option on CAM2029, a phase II-ready long-acting octreotide therapy from Camarus, paying an undisclosed milestone included in their $700 million deal signed two years ago for the indications acromegaly and neuroendocrine tumours. The licence also covers future products based on CAmurus's FluidCrystal Injection depot technology.

See a table listing all the major pharma mergers, acquisitions and collaborations agreed during September 2013