Pharma deals for March 2012

In this regular review of deals we focus on transactions announced during March 2012.    As usual for this series of articles we focus on those deals where financial terms are disclosed.

This month the transactions did not reach the dizzy heights seen last month with the GSK divestment appearing top of the March table at a transaction value of $614m, which is just over twice the number of sales achieved by the divested products in 2011.

This planned divestment by GSK included some heritage brands such as Zantac, Nytol, Solpadeine and Beconase as well as Lactacyd and Abtei.  The Herrenberg manufacturing site also formed part of the acquisition. GSK remains in active discussions to divest its non-core OTC brands outside Europe and North America.

Ophthalmics featured strongly this month – the highest value deal being the acquisition of Ista by Bausch and Lomb. The bid at $9.10 per share in cash brings the deal value to approximately $500m. Hot on the heels of this ophthalmics deal, Alcon acquired commercialisation rights outside the USA to Thrombogenics' ocriplasmin for the treatment of symptomatic vitreomacular adhesion (VMA), a progressive, debilitating eye disease for which there is currently no pharmacological treatment available.

Ocriplasmin has completed two phase III studies; Thrombogenics is to receive $98m upfront with a further $117m in milestones giving a headline value in total of $488m. Thrombogenics retains marketing rights in the US.

In its strategy to build a diversified late-stage ophthalmology portfolio, NicOx is purchasing an 11.8 per cent stake in Altacor, paying $2.6m in cash with an option to acquire the remaining stock by the end of May. NicOx already has experience in ophthalmology via its collaborations with Bausch and Lomb for BOL-303259-X, which has recently completed phase II studies for the treatment of glaucoma. 

The option approach is being increasingly adopted by companies in this currently risk averse financial climate.  Another company following the option route was Biogen Idec, which retains its place in the headlines from last month. Following its acquisition of Stromedix in February, Biogen Idec entered into an agreement with the privately owned MAKScientific.

This deal was for an exclusive, worldwide option and collaboration agreement to develop and commercialise drug candidates for the treatment of multiple sclerosis and other neurodegenerative diseases.  The option route gives Biogen Idec access to discovery stage drug candidates for all indications worldwide. On exercise of the option, Biogen pays a fee of up to $3m with up to a further $31m in development milestone payments plus royalties on net sales.

Shire also kept the news flow running from last month with a further two transactions – the exercise of its option with Heptares and also the acquisition of FerroKin BioSciences for an upfront payment in cash of $100m with further conditional milestone payments of $225m. Ferrokin's lead product, FBS0701 is in phase  clinical development with initial regulatory filings planned for myelodysplastic syndrome and haemoglobinopathies.

Another company which features regularly in Deal Watch headlines is Valeant, this time making a significant move to consolidate its operations in Russia and the CIS. Firstly Valeant announced the acquisition of product assets with a 2011 revenue net value of $55m from Gerot Lannach. This deal has closed at less than three times sales revenue and the majority of these assets are in Russia and the CIS.

Less than two weeks later, Valeant announced the purchase of the Russian company Natur Produkt, which with the previous transaction, brings Valeant's revenues in Russia to an expected $175m by the end of 2012.

In addition to the usual licences and acquisitions, there are signs of new approaches being taken by companies to source new products.  Merck has invested up to $90m over a seven year period into the new not-for-profit organisation Calibr  [Californian Institute for Biomedical Research]. The aim is to speed up the early stage translation research through to pre-clinical proof of concept. Merck has an option for exclusive licences for proteins or small molecule therapeutics emanating from Calibr.

The difficulty of the current climate for both partnering and financing is illustrated by the sale of GI Therapeutics to Aravis Therapeutics for $8.6m.  GI Therapeutics was listed on the stock market in 2006 and at this point in time was valued at $110m.

Since then, the company was not able to secure a development partner and also had disappointing clinical trials results for Rezular in irritable bowel syndrome which halted development in 2009.  Steps were taken to re-focus the business strategy in 2011 into specialty drugs and divesting non core dormant IP to Warner Chilcott but prove insufficient to lift the share price. 

The amount paid [€ 0.0917 per AGI share] was noted as being a 67 per cent premium on the recent closing share price and 130 per cent on the average daily closing price over the previous three months. This is realistic and as quoted by the Chairman, Ronan Lambe “Considered alongside other alternatives the offer represents the best outcome for shareholders.” However it is difficult to avoid the comparison of being only about 7 per cent from the original point of investment [€ 1.26 per share].

Increasingly companies are not prepared to stay with a deal that is not meeting expectations. Originally reported in Deal Watch in October 2010, this month Pfizer announced the end of its alliance with Biocon, the Indian company developing biosimilars.

Initially this deal for the commercialisation of Biocon's biosimilar insulin products carried a value of $350m. This consisted of $200m in upfront payments; $150m for development and regulatory milestones and other additional payments. Product launches were expected in Europe in 2012 and this deal was one of many as companies rushed to get into the biosimilars space.

However, having had to write off a reported $2.8bn on the withdrawal of its inhaled insulin Exubera in October 2007, closing this deal with Biocon early may be a more cost effective option for Pfizer in the long run. 

Local deals are still making news with Astellas signing up with Optimer for an exclusive collaboration and licence in Japan.  Astellas is making an upfront payment of $20m with milestones of a further $70m plus double digit royalties. Astellas will also take on the responsibility and costs for development and registration of fidaxomicin in Japan.

Other Japanese companies closing deals this month included Mitsubishi Tanabe which signed a strategic alliance with the Canadian company Medicago Inc to develop and commercialise three new vaccines, the first of which is rotavirus. Medicago receives an upfront of $3m with milestones of a further $30m.

This news follows the announcement of the new joint venture between GSK and Daiichi Sankyo, which is expected to create the leading vaccines company in Japan. The new company, called Japan Vaccine Co Ltd, will be initially focused on selling the key products from both companies.

However it is anticipated that the business will expand as new vaccines come through the development pipeline. Based on the fact that both the adult and paediatric vaccine markets are projected to see CAGRs from 2010 to 2015 of 10.3 per cent and 8.4 per cent respectively (Kalorama) and that the Japanese market still has plenty of growth potential, this looks like a good move to combine the well established vaccine expertise of GSK with Daiichi Sankyo's local knowledge. 

[a] Outside the USA
[b] For the USA
*Calibr : California Institute for Biomedical Research.

 

The Author
Sharon Finch is a consultant at Medius Associates