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Friday, June 15, 2012
That said, there’s a prevailing sense in the industry and on Wall Street that many marketplace trends accelerated by the Affordable Care Act were in the works prior to its passage and are likely to continue regardless of what happens to the act itself. The decision will obviously have very specific implications for biopharma as a whole and for individual companies and products, but the winds of change are in the offing.
At top levels of pharma, contingency planning has been ongoing, with companies and lawyers strategizing in great detail. One conversion for example concerns the legal basis for recouping money already paid out to government because of various ACA provisions in the event the court overturns all or parts of ACA. Our reimbursement team in Washington has been tracking the discussions, most recently a notable report by CMS Office of the Actuary released on June 12 in an online version of Health Affairs.
Regardless of the political and judicial tides, the stats help firm up a picture of the stakes at hand for biopharma. As reported in "The Pink Sheet" DAILY, the Centers for Medicare & Medicaid Services projects that spending on prescription drugs by public and private payers will jump 8.8% in 2014 over 2013 -- the year major coverage expansions under the ACA are scheduled to begin. If the ACA had not passed at all, that jump would have been only 4.1%.
The prescription drug industry, in short, stands to benefit more than most healthcare sectors – and CMS believes that this is because many of the newly insured (22 million estimated) who are driving the spending jump are younger and healthier individuals. Thus, they are more likely to utilize physician services and drugs than hospitalizations and medical devices, which are domains of the aging. Notably, most of the newly insured will benefit because they qualify for Medicaid as a result of the ACA (19.6 million), and only a minority will take advantage of the new state-based health insurance exchanges (3.1 million).
The message from some corners of Wall Street has been that whether the ACA survives or not, the reforming U.S. landscape presents some investors with abundant opportunities. Provider consolidation, cost-cutting, coordination of patient care, and re-allocation of risk are trends well underway in the marketplace.
At a recent Jefferies & Co. investment conference, private equity leaders drove home that point: Despite the ACA’s importance -- one panelist summed it up as the most important healthcare legislation since Congress passed legislation creating Medicare in 1965 -- they also noted that the “horse is out of the barn” in terms of reform.
The private equity investors -- who have a bias for buying ongoing businesses with revenues -- do not, for a variety of reasons, play heavily in the world of early-stage discovery and innovative R&D-driven companies (too much risk, few choose to have internal clinical expertise that is necessary to make long-term bets on innovation). That said, the deals they make now have implications down the road for biopharmas, as drug companies see their customer bases consolidate and everyone in healthcare looks to cut costs, and as consumers take a more active role in shaping their own health care decision making. All on the panel agreed, for example, that employer-sponsored health care insurance, now the source of insurance for less than half of the U.S. population according to statistics presented an ISPOR meeting earlier this month, will go away. The replacement is likely to be defined plans, along the lines of current retirement plans.
What all this means in the biopharma deal making world will be food for thought for years to come. Meanwhile, ordinary deal-making in pursuit of material matters continues: immediate revenues, long-term innovation, or goals in between, with all its routine pleasures and tribulations, as the latest crop of partnering news shows in …
Upsher-Smith/ Proximagen - After teaming up twice since 2008 with Proximagen and acquiring a 16% stake in the U.K. biotech, Upsher-Smith Laboratories announced on June 13 that it is buying out its partner for £223 million (~$347 million). The proposed acquisition includes additional contingent-value rights that could boost the deal value to nearly $555 million, based on the “future success” of two Proximagen compounds: a vascular adhesion protein-1 (VAP1) inhibitor, which is entering Phase I in rheumatoid arthritis, and PRX00933, in Phase III for obesity and diabetes. Privately held Upsher-Smith has obtained unanimous support for the purchase from Proximagen’s board of directors as well as irrevocable undertakings from shareholders representing 72% equity in the biotech to accept the deal. That 72% includes the 16% already owned by Upsher-Smith. For each Proximagen share, Upsher-Smith has agreed to pay £3.20 (about $4.98), representing a 16% premium over Proximagen’s closing share price on June 12 (£2.75/$4.28). A relationship between the two companies dates back to 2008, when Upsher-Smith agreed to a potential $232 million collaboration with Proximagen for an undisclosed upfront payment plus development and sales milestones to obtain worldwide rights to PRX1, a levodopa prodrug still in preclinical development for Parkinson’s disease. Nearly two years later, in April 2010, Upsher-Smith licensed North American rights to tonaberstat, a neuronal gap junction inhibitor now in Phase II for epilepsy in refractory patients. Under that deal, Upsher-Smith took over development, regulatory and commercial responsibilities for the compound, with Proximagen retaining commercial rights in Europe. The companies would split royalties and milestones evenly if tonaberstat were sub-licensed outside of North American or Europe.--Joseph Haas
Novo Nordisk/ JDRF --Novo Nordisk has partnered with the Juvenile Diabetes Research Foundation to develop novel immunotherapies for the disease, the partners announced June 13. As part of the agreement Novo anticipates taking over select JDRF-funded research programs to move them into the clinic faster. “The money flow is entirely one way from Novo Nordisk to JDRF,” said Novo Nordisk’s Matthias von Herrath, the director of the Danish company’s newly opened Type 1 Diabetes R&D Center in Seattle. In exchange, JDRF will share its databases and research expertise with Novo Nordisk and potentially hand off certain research projects, currently in the hands of small biotechs or academic researchers, to the specialty pharma. In the area of type 1 diabetes, Novo Nordisk’s main research emphasis is on the development of immunotherapies that direct the immune system to protect, rather than attack, beta cells. Type 1 diabetes occurs when the body’s immune system attacks and destroys the glucose-responsive, insulin-secreting beta cells of the pancreas. The disease usually occurs in childhood and requires lifelong use of insulin. JDRF is invested in several vaccine projects for type 1 diabetes, including research partnered with Selecta Biosciences and Parvus Therapeutics.--Jessica Merrill
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Newron Pharmaceuticals SpA/ NeuroNova AB -- In the autumn of 2011, the future outlook for Newron Pharmaceuticals was looking bleak; rights to its lead product, safinamide, an add-on therapy for Parkinson's disease, had just been returned by the licensee, Merck Serono, and subsequently a planned merger with Finland's Biotie Therapies had been taken off the table. But fast forward nine months, and its prospects are decidedly more promising, with new licensees found for safinamide and now another merger in prospect. On June 13, Newron announced the proposed acquisition of Swedish neurogenesis company NeuroNova AB in an all-share transaction valued at €15.4 million ($19.3 million). The acquisition will bring two potential growth factor-based products to Newron – these compounds, when infused directly into the ventricles of the brain, may be active in stimulating stem cell proliferation and be potential therapies for neurodegenerative diseases, Newron says. But perhaps more importantly, NeuroNova's venture capital backers, Investor AB and HealthCap, along with grants from the EU Commission, are expected to provide a further €16 million in funding for Newron. The hugely experienced Nordic life sciences investors have vowed to support Newron's desire to become a European-based CNS-focused biotech.--John Davis
Stiefel/Basilea -- Stiefel, the dermatology unit ofGlaxoSmithKline, has acquired global rights to the eczema drug Toctino (alitretinoin) from Swiss drugmaker Basilea as the compound nears approval in the U.S. The Research Triangle Park-based derma paid £146 million ($228.5 million) in cash for rights to the oral drug, which is already approved in 29 countries for severe chronic hand eczema in patients who do not respond to topical corticosteroids. Toctino is sold in 14 of those countries, and Stiefel acquired distribution agreements in Europe, Canada, Mexico, Israel and Korea as part of the deal. If FDA approves Toctino, currently in Phase III, Basilea will receive a milestone payment of £30 to £50 million, as well as low double-digit royalties after three years have passed. Basilea reported CHF 31 million ($32.6 million) in Toctino sales during 2011; the company said it will use the proceeds from the drug’s sale to support ongoing development of a portfolio of anti-infectives, including ceftobiprole for treatment of pneumonia in hospitals and isavuconazole for fungal infections. – Paul Bonanos
Polyphor/ Boehringer Ingelheim -- In a research collaboration and licensing agreement announced on June 12, Polyphor Ltd will apply its MacroFinder drug discovery technology to targets selected by Boehringer Ingelheim to identify and optimize novel macrocyclic drugs. Although specific terms were not disclosed, Polyphor will receive an upfront payment, research funding, and milestone payments as candidates progress through development and onto the market. The Swiss-based biopharma is also eligible for royalties on sales of approved products. Although the targets were not disclosed, a scan of the literature shows macrocyclic drugs addressing a wide spectrum of disease states. The MacroFinder platform generates synthetic, macrocyclic molecules able to modulate extracellular protein-protein interactions and other complex biological targets, enabling optimal activity, selectivity, and ADMET properties such as cell permeability and oral bioavailability. Macrocyclic chemistry is enjoying a resurgence in the industry; two weeks ago, Genentech inked a similar deal with macrocyclic specialist Ensemble Therapeutics. For Polyphor, backed by Biomedinvest and Novartis Venture Fund, the tie-up with Boehringer is its fifth discovery deal since 2008. Boehringer has also been active, signing a spate of recent discovery deals, the most significant being with Forma Therapeutics to screen and optimize oncology candidates.
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