Deals of the Week: Is Botox On The Block?

Allergan Inc., the maker of blockbuster Botox (onabotulinimtoxinA), might be the next megadeal candidate for Big Pharma buyers. The specialty pharma and medical device maker’s market cap has taken a couple of big hits in 2013, dipping nearly 30% between mid-April and late June. That’s led to speculation, including a recent Bloomberg report, suggesting that interested buyers might want to move quickly while its stock price is depressed.

Neither of Allergan’s two primary setbacks was related to its Botox franchise, which brought in revenues of $1.8 billion in 2012 for both its cosmetic and non-cosmetic indications. The drug is known best for its wrinkle-remedying properties, but 52% of Botox sales last year were for other indications, including migraine prevention, overactive bladder, spasticity and underarm sweating. Botox accounted for roughly 30% of Allergan’s $5.7 billion in sales overall, and about 36% of its pharma revenue. (About a sixth of Allergan sales come from the device side, which includes cosmetic implants and obesity treatments such as Lap-Band.)

Rather, Allergan’s stock price has dipped for reasons related to a separate migraine drug and an eye-care product. In April, its inhalable Levadex (dihydroergotamine) for migraine received a second dreaded “Complete Response” letter from FDA, further delaying Allergan’s attempt to grab a larger share of the non-triptan migraine drug market with a convenient formulation. (Allergan recently bought out MAP Pharmaceuticals Inc., the manufacturer of Levadex and its dose-metering canister, for $884 million.) And last month, FDA said it wouldn’t require human clinical trials on generic competitors to dry-eye medication Restasis (cyclosporine), an $800 million drug facing patent expiration in  2014. That could lead to lost sales much sooner than previously expected.

While the setbacks raised some analysts’ doubts about Allergan’s long-term growth, the company still has a lot going for it. “Allergan could represent an attractive opportunity – a good, but recently diminished pipeline, a growing emerging markets strategy, a better cash-pay mix in the U.S. than traditional pharma, and some very durable franchises, such as Botox,” wrote BMO Capital Markets’ David  Maris in a June 25 note.

Allergan’s largest business segment is eye care, which generated $2.7 billion in revenue last year largely on the strength of dry eye remedies and glaucoma treatments. Given the recent pharma interest in ophthalmology, particularly around such areas as age-related macular degeneration and diabetic macular edema, its eye care specialty could prove appealing.

Many companies are sitting on large piles of cash, but few could match Allergan’s current market capitalization of about $26.5 billion, let alone the premium they’d owe to buy it outright. Past megabuyouts have included both stock and cash components. Pfizer Inc. paid $44 billion in cash for Wyeth, representing about two-thirds of the deal’s total value, while other mega-mergers have been weighted in favor of stock components. Merck & Co. Inc.’s $42 billion acquisition of Schering-Plough Corp. featured roughly 56% in equity, while Johnson & Johnson’s $21.7 billion deal for Synthes Inc. was tilted about 65%/35% in favor of stock.

At a price sure to exceed $30 billion, who might be interested? GlaxoSmithKline PLC already sells Botox in China and Japan, and could strike; it was rumored to be interested in buying out Allergan four years ago as well. And Merck was said to be in the running for Bausch & Lomb Inc. before Valeant Pharmaceuticals International Inc. swooped it up for $8.7 billion in May. Merck shares Allergan’s interests in ophthalmology, allergy medicines, and migraine as well as other areas of neurology.

Allergan was even sold once before, way back in 1980, when Deals of the Week was but a mimeographed note delivered via carrier pigeon. According to a Los Angeles Times story from back in the day, SmithKline Corp. acquired it for the princely sum of $259 million, built its revenues all the way up to $80 million in 1988, then spun it out in the summer of 1989. Those were the days. - Paul Bonanos

We hope you spend the weekend reminiscing about your salad days too, but before you step out into the summer afternoon, take a look back at...

Amgen/Servier: A complex partnership between Amgen Inc. and Servier SA, with rights to compounds going in both directions, likely will provide the California  biotech with a quick entry into the cardiovascular therapy market. The move comes several years before Amgen hopes to launch AMG 145, a Phase III monoclonal antibody in development for hyperlipidemia. In the collaboration, announced July 9, Amgen obtains U.S. commercial rights to  the French company’s Procoralan (ivabradine), a novel, oral drug with utility in stable angina and chronic heart failure. Procoralan was approved in Europe in 2005 and now is marketed in more than 100 countries, but the privately-held Servier  never filed for its U.S. approval. The drug’s sales rose healthily after Servier garnered a second indication last year in chronic heart failure, tallying about $280 million in net sales in 2012, roughly a 30% increase over 2011 totals. Amgen soon plans to file an NDA for ivabradine, relying strongly on the filings Servier compiled for the EU registration. The biotech will pay a $50 million upfront for the U.S. rights to the drug, and Servier also could earn undisclosed milestones and royalties related to ivabradine. The U.S. firm also gets an option to develop and commercialize a second heart failure compound, S38844, in the U.S. Little is known about the Phase II candidate, with Amgen volunteering only that it shares a “similar” mechanism of action to ivabradine with potential for once-daily dosing. Meanwhile, Servier obtains European commercialization rights to Amgen’s Phase II heart failure compound omecamtiv mecarbil. No terms around S38844 or omecamtiv were disclosed. - Joseph Haas

Forma/Cancer Research Technology: Forma Therapeutics Holdings announced also on July 9 a collaboration with Cancer Research Technology Ltd., the for-profit arm of Cancer Research UK, to discover drugs that target a large protein family with implications in the broad and emerging field of protein homeostasis. As Forma and CRT advance compounds that target deubiquitinating enzymes, they will create separate corporate entities to house the drug candidates and their intellectual property. No financial details were released, but the new partners said that the separate entities, which Forma has dubbed Asset Discovery and Development Companies, or ADDCos, would be wholly owned subsidiaries of Forma. CRT would take no equity stake, but it is eligible for performance milestones and a share of revenue as the compounds progress. Forma will pay research costs. CRT has named five principal investigators to shepherd the collaboration from among its network of researchers, all of whom are at least partially funded by the private charity Cancer Research UK. The ADDCo structure is a twist on the asset-financing model gaining popularity in biotech, as investors look to place bets on specific products without having to support research infrastructure. Forma says it would like to sign up other academic groups for similar arrangements. - Alex Lash

Immunocore/GlaxoSmithKline: Immunocore has scored a second high-profile partner in as many weeks through a deal inked with GlaxoSmithKline. The UK-based biotech will receive £142 million ($210.7 million) in preclinical milestones across several targets as well as £200 million ($296.7 million) in development and commercial milestone payments for each target that reaches the market, plus double-digit royalties on sales. Immunocore develops ImmTACs, a new class of bispecific therapeutic proteins that consist of high-affinity T-cell receptors linked to an antibody fragment, anti-CD3, which activates the immune system. T-cell receptors recognize intracellular changes that occur, and Immunocore’s ImmTACs are designed to target and destroy cancer cells without affecting healthy cells. Cancer immunotherapy has become a hot space of late with several Big Phramas putting a lot time and money behind programs in this space. Two weeks prior to the GSK tie-up, Immunocore signed its first significant partner in Roche’s Genentech. In that arrangement, Immunocore will receive an upfront payment of $10 million to $20 million for each program, as well as $300 million in development and commercial milestones related to each target and tiered royalties. - Lisa LaMotta

Array/Loxo: Array BioPharma has added to its laundry list of partners for its oncology platform, with the addition of Loxo Oncology, a venture-backed start-up that is centering its resources around an Array asset. According to the companies, Array will handle preclinical development of an undisclosed oncology target in exchange for an equity stake in Loxo, as well as the potential for $434 million in milestone payments and eventual royalties on any products that result. Loxo was founded in May 2013 by Josh Bilenker, a partner in Aisling Capital, a life science venture firm headquartered in New York. Aisling currently is investing out of its $650 million third fund. Array has done a number of deals around its platform resulting in more than 11 clinical candidates, eight of which are in Phase II/III. The company uses the funds garnered through upfront payments and milestones to fund the development of its two wholly owned programs: ARRY-520 for multiple myeloma and ARRY-614 for myelodysplastic syndrome. ARRY-520 is in Phase II and Array intends to announce its plans for pursuing approval before the end of the year. The company also is finishing up Phase I trials of ARRY-614 and intends to make a decision regarding proof-of-concept trials by the end of 2013. - L.L.

Chiesi/uniQure: Chiesi Farmaceutici and uniQure BV announced on July 9th a co-development and commercial deal in which Chiesi will sell Europe’s first approved gene therapy, Glybera (alipogen tiparvonvec) for the ultra-orphan monogenic disease lipoprotein lipase deficiency and another uniQure gene therapy, now in Phase I/II for hemophilia B, in Europe and selected emerging markets. UniQure retains commercial rights on both products in the U.S., Japan, parts of Latin America and Asia, and Australasia. The deal paves the way for an emerging field that has been long in the making and is only now beginning to deliver on its early promise. Chiesi will pay uniQure €17 million ($21.8 million) in upfront cash and will make an equity investment of $18 million. It will also pay royalties ranging from 20%-30% over time on both products. In addition, Chiesi will fund and collaborate on the remaining clinical program for the hemophilia B product. Chiesi’s investment triggered the conversion into new uniQure shares of $18.1 million in outstanding convertible debt that uniQure raised last May from Coller Capital and other investors. Chiesi, an acquisitive and innovative midsize Italian pharma, has recently increased its focus on rare diseases in addition to its respiratory and hospital products franchises. Armed with a fresh infusion of $58 million in total equity and collaborative funding, uniQure’s immediate task, according to CEO Jörn Aldag, is twofold: develop its substantial pipeline of gene therapy programs and build out commercial infrastructure especially in North America in preparation for FDA approval of Glybera. Longer range, the company must pioneer the pricing for an unprecedented therapeutic modality so that it can build a sustainable company and reward its investors. - Michael Goodman

Vivus/Menarini: While it waits for results from a contentious proxy contest, Vivus Inc. is still striking deals. The company is still fending off a challenge centering on its marketing plan for weight-loss drug Qsymia (phentermine and topiramate), but it’s found a partner for erectile dysfunction treatment Stendra (avanafil). Italy’s Menarini Group agreed July 9 to pay €16 million ($21 million) to obtain Stendra’s rights in Europe, Australia and New Zealand, although Vivus says it expects another €23 million during the first year of the deal. Milestone payments could add €79 million to the deal, which also includes a provision under which Menarini will pay Vivus’ obligations to Mitsubishi Tanabe Pharma Corp. and a ten-year supply agreement. Menarini already markets premature ejaculation drug Priligy (dapoxetine) in Europe, and says it will field a sales team of 1,350 representatives for Stendra. The Italian company plans to conduct a commercial launch in early 2014. Stendra is a phosphodiesterase-5 inhibitor in the same class as Viagra (sildenafil citrate). Top Vivus shareholder First Manhattan Co. is challenging company leadership, which elected not to choose a marketing partner as it launched Qsymia, a slow seller in danger of being eclipsed by Eisai Co. Ltd. and Arena Pharmaceuticals Inc.’s rival drug Belviq (lorcaserin) despite a first-to-market advantage. - P.B.

Mitsubishi/Medicago: Mitsubishi Tanabe has been a small stakeholder in Canadian vaccine developer Medicago Inc. for a couple of years, but the Japanese pharma now plans to acquire 60% of the company. In a deal announced July 12, Mitsubishi said it would pay C$1.16 per common share, a 22% premium to Medicago’s July 11 closing price, to obtain the majority stake. The deal has a maximum price of C$179 million ($172.6 million); Philip Morris International Inc. will retain the 40% of Medicago shares it currently owns. Mitsubishi Tanabe has held a 6% share in Medicago since 2011, and the companies signed a deal in March 2012 to collaborate on vaccines – including rotavirus – using Medicago’s virus-like particles. Medicago announced June 20 it successfully produced a rotavirus vaccine based on virus-like particles (VLP) that comprised all four rotavirus antigens and filed an international patent application for the product, claiming it was the first time for a rotavirus VLP to be produced in plants. Medicago’s lead compound is an H5N1 vaccine currently in Phase II development that uses plant technology instead of egg-based or cell production, followed by a quadrivalent seasonal influenza vaccine in Phase I. Medicago has a rabies vaccine in preclinical development as well as an undisclosed target in collaboration with a top 10 pharma, according to the company’s pipeline. - Dan Poppy

Thanks to Flickr user vancouverlaser for the Botox shot, reproduced under Creative Commons license.