Certain sounds signify the Fourth of July season in the U.S. – the pop and boom of fireworks, the sizzle of burgers and hot dogs on the grill, the crack of the bat as baseball reaches mid-season. And, oh yes, the sound of the other shoe dropping in the pharma/biotech M&A arena.
Wait, the next shoe dropping in biopharma M&A? That’s exactly what the industry and its followers are awaiting in the immediate aftermath of Bristol-Myers Squibb’s $5.3 billion buyout of Amylin Pharmaceuticals just prior to the holiday. Now, industry analysts are studying that and other recent deals for trends or clues about what is coming.
Near-term, Wall Street awaits the outcome of GlaxoSmithKline’s bid for its Benlysta (belimumab) partner Human Genome Sciences. On June 29, GSK extended its hostile, $13-per-share offer for the Maryland biotech through July 20, while HGS again turned down the bid and said it is accepting counter-offers until July 16.
Salveen Richter, managing director, biotechnology equity research, at Cannacord Genuity Securities, pointed to recent pharma buyouts of biotechs such as Gilead Sciences/Pharmasset, Bristol/Inhibitex, Amgen/Micromet and AstraZeneca/Ardea Biosciences, saying pharma seems to be focused on acquisitions that offer later-stage assets or proven revenue generation or profitability.
“Overall, we’re seeing pharma be opportunistic, picking assets to build their R&D engines or showing interest in later-stage, proven assets, but they have avoided limited-product companies in the initial drug launch phase,” she said.
AstraZeneca/Ardea clearly was a continuation of the U.K. pharma’s interest in bolt-on acquisitions, she added. “AstraZeneca obviously made an investment in rheumatology through its partnership with Rigel Pharmaceuticals, but the recent Ardea acquisition was a bolt-on as they could just add that asset for gout right onto the rheumatology franchise – and they have publically stated they are looking for more,” Richter noted. “If a company is in a therapeutic area with built-out commercial infrastructure or plans to [build], bringing in an asset in the same category is highly leveragable.”
With some speculating that the Amylin purchase will lead to a run on companies focused on diabetes or obesity, Stephen Willey, director, equity research, biotechnology, at Stiefel Nicolaus, wondered if such assets, particularly in the diabetes space, are in plentiful supply.
“The diabetes space is tough only because you don’t see a lot of companies playing in it,” he said. “That’s because it’s a large, primary care market and one of these opportunities whereby the acquirer is going to be held hostage to finding a partner. I’m not sure there’s necessarily a ton of read-through on the Amylin take-out; to me that was company-specific.” Buying Amylin was a response by Bristol to its clinical setbacks with dapagliflozin, which created a hole in its revenue projections for 2015-2016, he explained.
But to the extent M&A interest turns to diabetes, as it did with hepatitis C in 2011, Willey cites Lexicon Pharmaceuticals as a potential target. “Their Phase III-ready asset [LX-4211, an oral dual inhibitor of sodium-dependent glucose transporters 1 and 2 (SGLT1/SGLT2)] is probably better than any other diabetes asset that we’ve seen in development,” he asserted. “I would argue that the way that drug works, once-daily oral, has the potential for making the GLP-1 analogues obsolete in five years.”
Simos Simeonidis, senior biotechnology analyst with Cowen & Co., does not see any unusual trends in this year’s M&A activity – just a further recognition by big pharma of its ongoing need to respond to the patent cliff in varying ways.
“It’s part of a continuum – we’ve seen a lot of pharma acknowledge that their internal innovation engines are not working well and they’re cutting,” he said. “They’re realizing that they’re not effective, so they’re saying ‘let’s cut some of the R&D function’ and out-source it to their business development and M&A budgets because there are some late-stage assets they should bring in instead of waiting for their own programs to happen.”
If there is a wave coming, though, Simeonidis thinks it may be in the obesity space. Arena Pharmaceuticals recently obtained FDA approval of weight-loss drug Belviq (lorcaserin), but was required to delay launch because the drug is classified as a controlled substance. That means Vivus still has a chance to beat lorcaserin to market with Qnexa (phentermine/topiramate), which has a July 17 PDUFA date.
“Qnexa is an asset that should be in the hands of big pharma,” Simeonidis said. “I think it’s the best obesity drug of the three [Orexigen Therapeutics’ Contrave (naltrexone/bupropion) is a third candidate]. Lorcaserin is approved but it won’t be on the market for four to six months, so Vivus could [have its drug] approved and on the market before Arena, assuming there is not a similar delay. And there’s a big difference between the two drugs – the Vivus drug is a lot more effective so if big pharma looks into obesity, it will grab Vivus.”
Whoever grabs what, Deals of the Week will be there to record and interpret the action. Now on to …
Janssen/CorImmun: Johnson & Johnson subsidiary Janssen-Cilag revealed that it has acquired German biotech CorImmun for an undisclosed amount. The deal, which came to light June 28, nets Janssen a Phase II drug candidate for heart failure. CorImmun had been investigating the small cyclic peptide COR-1, which is thought to reduce the autoimmune effects of antibodies that act against the beta-1 adrenergic receptor, thereby improving heart function and mitigating myocardial damage in patients in the midst of heart failure. A mid-stage trial of the drug began in September 2011. Janssen will assume responsibility for further development in exchange for an upfront payment, although it may owe a further payment based on a clinical milestone as well. Investors in CorImmun included MIG Verwaltungs AG, Bayern Kapital, BioM AG, HighTech Gruenderfonds and KfW Bank; the company raised a €7.45 million ($9.23 million) second round of funding in October 2010. – Paul Bonanos
AstraZeneca/Cellworks: AstraZeneca said it will collaborate with Saratoga, Calif., start-up Cellworks to discover and develop new combination therapies for drug-resistant forms of tuberculosis. The collaboration also will receive support from Wellcome Trust, the U.K.’s largest medical charity. Cellworks, which has an R&D center in Bangalore, India, will use its platform to identify potentially efficacious drug combinations with few toxic side effects. AstraZeneca will “validate” the 10 best models using both in vitro and in vivo techniques, according to a company statement issued July 2. Although the companies initially will address drug-sensitive and resistant tuberculosis, they say they will aim to treat multi-drug-resistant TB (MDR-TB) down the road. Founded in 2005, Cellworks already has used its predictive platform to identify oncology and autoimmune drugs, including a rheumatoid arthritis treatment it says is ready for clinical development. Artiman Ventures backed the company in a $7.5 million Series A round during early 2009. – P.B.
Ferring/Albireo: Gastroenterology-focused Ferring Pharmaceuticals licensed a Phase III-ready constipation drug from AstraZeneca spinout Albireo on July 3 in a deal involving an undisclosed upfront fee, milestones and tiered double-digit royalties on sales. Ferring, which also is taking over development costs for the drug, elobixibat, gains worldwide rights except for Japan, South Korea, Thailand, Indonesia, Vietnam and Taiwan. Albireo licensed Asian rights to the compound to Japan’s Ajinomoto, also for undisclosed terms, in April. Elobixibat, a first-in-class compound that modulates enterohepatic circulation of bile acids by partially inhibiting the ileal bile acid transporter, increasing colonic fluid secretion and motility, is about to enter Phase III in chronic idiopathic constipation and Phase IIb in irritable bowel syndrome with constipation. Ferring said the drug will strengthen its gastroenterology portfolio, led by the inflammatory bowel disease drug Pentasa (mesalazine). Sweden-based Albireo was founded in 2008 when AstraZeneca spun out a set of gastrointestinal compounds into the new company, which was backed in a $27 million Series A by Nomura Phase4 Ventures, TVM Capital and Scottish Widows Investment Partnership. – Joseph Haas
ADC Therapeutics/Cancer Research UK: Switzerland-based antibody-drug conjugate developer ADC Therapeutics has revealed one of the sources of the antibodies required to target its "warheads" to cancer cells. It has signed an agreement, announced July 6, with Cancer Research Technology, the commercial arm of charity Cancer Research UK, to exploit antibodies and peptides identified by researchers working for the charity, and one antibody co-owned by the University of Copenhagen, Denmark. These will be combined with warheads and linkers obtained from Spirogen Ltd. under an agreement signed in March 2012, through which ADC Therapeutics can use Spirogen's pyrrolobenzodiazepines (PBDs) against 10 specific targets, cancer-associated receptors and the like. The PBDs are released when the conjugates are internalized into cells, and bind deep in the minor groove of DNA to block replication. But the neat bit is that they usually are overlooked by DNA-repair enzymes, so they might not be associated with the development of resistance. The antibody-PBD conjugates will be taken forward into preclinical studies initially funded by ADC Therapeutics and conducted in the laboratories of three London universities, Queen Mary, UCL and King's College London. Financial details of the collaboration were not disclosed. ADC Therapeutics, which was established at the start of 2012 by the private equity firm Celtic Therapeutics Management LP, also is the majority owner of Spirogen. – John Davis
Photo credit: Wikimedia Commons