PHARMA DEALS DURING SEPTEMBER 2014
(Part 2 out of 3)
by Roger Davies
This year there have been two major strategic initiatives by big pharma companies: rationalisation of portfolios by trading business areas with one another to consolidate and strengthen market share in specific sectors; and M&A of large companies driven by the need to bolster sales and profits by synergy and tax savings
If you can't stand the heat…
While the uncertainty about tax inversion is causing some big pharma companies to sweat in the political limelight, others are staying cool by engaging in more run-of-the-mill company and asset (product) acquisition deals. The deals can be grouped into:
- Acquisition of biotech companies by big pharma to build pipeline and late stage products. The highest value deal this month was J&J's acquisition of Alios for $1.75 bn. Alios has an oral anti-viral in phase 2 for treatment of infant respiratory syncytial virus (RSV) which complements J&J's early stage programmes in RSV. Similarly Daiichi Sankyo has supplemented its oncology pipeline by acquiring Ambit Biosciences for $400 m. Ambit develops kinase inhibitors and has quizartinib in phase 3 for acute myeloid leukaemia.
- Acquisition of product assets or companies with marketed products by speciality and generic companies. KV Pharmaceuticals emerged from Chapter 11 bankruptcy in September 2013 with the new name Lumara Health and two divisions: maternal health for the orphan drug Makena; and women's health for three other products. This structure was probably set up with the objective of maximising the sale value of the company. Perrigo who manufactures two of the three women's health products is acquiring the products for $82 m. The current annual sales multiple is 5.5, but the products had sales of $78 m prior to production problems. Amag is buying the remaining company for up to $1.025 bn. It contains Makena, a progesterone injection with US orphan status to reduce the risk of preterm birth with annual sales of $110 m (+72%). The upfront payment of $675 m represents 6 x sales and there are sales milestones totalling $350 m. The potential maximum sales multiple of 9 for Makena reflects its high margin and growth rate. In contrast, the lower growth and margin Arixtra plus its authorised generic version in the US being bought by Mylan from Aspen for $400 m has a sales multiple of 2.6.
- Acquisition of complementary and competitor companies. The acquisition of Civitas for $525 m provides Acorda with a product for Parkinson's disease in phase IIb that complements its CNS portfolio. The UK acquisition of the UK contract manufacturing company Aesica Pharmaceuticals which has 6 sites in Europe for $374 m (1.2 x sales) complements the medical device manufacturing of Consort Medical. The contract manufacturing sector is in a state of flux with the acquisition of Patheon last year by DSM and Akorn's acquisition of the ophthalmic manufacturer Excelvision in July this year. In India this month, Strides Arcolab has acquired another Indian generic and API supplier Shasun in an all stock deal worth $200 m to add products to its portfolio. Glanbia based in Ireland has bolstered its US presence with the acquisition of Isopure the US sports nutrition product company for $150 m (2 x sales).
Licensing rumbles along in the background with creative deals for the US
Big pharma M&A and rationalisation of portfolios may be the headline topic at the moment but licensing deals continue in the background. Often these deals are just as important to the licensee's business as M&A and probably are a lot less costly than acquiring a licensor's company. In recent months there seems to have been an increasing number of licensing deals with more flexible financial terms not just to deal with risk but also to change the reward structure at a later date. In addition many more deals include carve outs for specific countries and activities such as manufacturing and also include co-promotion.
The two highest value licensing deals this month are for oncology products in phase 3 and both have carve outs and other creative terms. Baxter is licensing Merrimack's nanoliposomal injection of irinotecan which has orphan status in the US and the EU for metastatic pancreatic cancer, but does not have US rights. In contrast, AbbVie has US rights but is required to co-commercialise and equally share profits with Infinity who book the sales. Outside the US, AbbVie exclusively commercialise duvelisib but pay a heroic royalty of 23.5% to 30.5%. The royalties are high because Infinity has to share the proceeds with Mundipharma and Millenium. One can't escape one's past.
Another creative deal also with a US theme is the early stage deal between MyoKardia, a company based in California, and Sanofi. Myokardia will develop two HCM (hypertrophic cardiomyopathy) programmes where it retains US commercialisation rights and Sanofi has ex-US rights; and a third DCM (dilated cardiomyopathy) programme will be developed by Sanofi with global commercialisation rights. Sanofi has the right to co-promote new HCM indications in the US and MyoKardia can co-promote the DCM product in the US. It certainly would have been simpler, but probably more expensive, if Sanofi had acquired MyoKardia! That may still be on the cards as Sanofi has made an equity investment in MyoKardia as part of the upfront.
There are two other big pharma / biotech deals this month that appear to be more typical of traditional licensing deals. Boehringer Ingelheim has taken a licence to Curevac's messenger RNA vaccine for one of its compounds and the Californian company, Sutro, has signed an early stage deal with Merck KGaA to license its antibody drug conjugate (ADC) technology. With the growth of antibody products, there is increasing interest in ADC technologies. Four years ago Genmab started working with Seattle Genetics' ADC technology and has now signed a new deal using a Genmab antibody. The creative aspect of this deal is that Seattle has retained an option to increase the Genmab royalties to double digit levels in exchange for a reduction in milestone payments. The key unanswered question is when does the option expire? Expiry of the option is no longer an issue for TG Therapeutics now that it has exercised early its option with Rhizen to change their deal from a 50/50 joint venture to a global (excluding India) licence. The product, an oral PK13 delta inhibitor appears to have completed phase 2 the stage when most options would expire.
Finally it is interesting to see yet another big pharma / big pharma development and commercialisation collaboration. These have become increasingly popular as big pharma seeks to reduce risk by sharing costs and revenues particularly in uneconomic therapeutic areas, for example, antibiotics and in therapeutic areas such as degenerative neurological diseases where there is a high risk of development failure. AstraZeneca and Lilly have announced a joint development and commercialisation deal for AstraZeneca's BACE inhibitor in phase I for Alzheimer's disease. Lilly will lead the development effort and both companies will share costs and revenues with AstraZeneca getting $50 m in 2015 and a further potential $450 m in milestones. AstraZeneca estimated that the product has potential peak sales of $5 bn and a 9% chance of success. This is why big pharma companies are working together. Perhaps “a problem shared is a problem halved?”
Fuente: PMLiVE
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