Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News
Pace of Biopharma M&A Slows from First Half Stampede of Deals
When it comes to biopharma merger-and-acquisition (M&A) activity, 2018 started not with a whimper, but with a bang. First came predictions of record-setting activity: EY projected in January that this year would soar well past last year’s $200 billion annual volume of deals.
The first few months lived up to expectations: All of the top 10 M&A deals of January–June 2018 exceeded $1.5 billion, paced by the completion of Bayer’s $63 billion buyout of Monsanto, followed by the approximately £46 billion ($59.5 billion) Takeda Pharmaceutical acquisition of Shire, set to close next year. But as companies have spent their M&A capital, and the valuations of potential takeover targets rise, the red-hot market for buyout deals has cooled off.
“Some earlier-stage assets are getting more and more expensive. So, if you’ve got a good-looking early-stage asset, or maybe it’s a platform technology from a startup, and it has some potential, these companies are demanding pretty high premiums,” Zara Fulton, Ph.D., principal biotech and pharma analyst with Informa Pharma Intelligence, told GEN. “A lot of the big pharmas are looking at strategic bolt-on opportunities, but they’re not going to come cheaply.”
Sanofi carried out a bolt-on purchase earlier this year with its approximately $11.6 billion acquisition of Bioverativ. The deal, announced January 22 and completed March 8, is designed to expand the buyer’s portfolio in specialty care and strengthen the rare disease presence it established seven years ago.
Other examples of takeover targets attractive to would-be buyers include developers of gene therapies, Fulton said.
Below are 10 biopharmas that have been speculated by analysts and other market watchers as the subject of buyout activity in recent months, based on notes to investors and comments in news outlets. For each company mentioned, this list explains where talk of acquisitions has surfaced, and why.
This year’s list combines four companies spotlighted in February with six that have surfaced as takeover targets since then. Of the 10 companies highlighted in GEN’s previous list of takeover targets, published February 26, one has already been acquired—gene therapy developer AveXis was acquired by Novartis for $8.7 billion in a deal announced April 9 and completed May 15.
That’s as good as GEN’s track record last year, when one company on our 2017 list found a buyer (Juno Therapeutics, acquired by Celgene for $9 billion). Kite Pharma, acquired last year by Gilead Sciences for $11.9 billion, made GEN’s 2016 Takeover Targets list. The 2015 list featured three since-acquired companies: Juno, Ariad Pharmaceuticals (by Takeda for $5.2 billion), and Medivation (by Pfizer for $14 billion).
Given its portfolio focused on treatments for CNS disorders, Informa Pharma Intelligence has concluded that Acorda Therapeutics “presents an attractive takeover target in 2018.” Also agreeing with that view is Jefferies analyst Steven DeSanctis. The Wall Street Journal in January reported that the company was exploring a possible sale, while Bloomberg reported that Biogen and UCB were considering potential bids for Acorda; both news outlets cited unnamed sources, and the company has not commented.
Acorda hopes to enhance its portfolio by bringing to market by year’s end Inbrija™ (levodopa inhalation powder), indicated for symptoms of OFF periods in people with Parkinson’s disease taking a carbidopa/levodopa regimen. Inbrija is under FDA and European Medicines Agency review, with the FDA setting a target PDUFA decision date of October 5.
Even if Inbrija reaches the market, Acorda faces another, perhaps more daunting challenge: The U.S. Court of Appeals for the Federal Circuit on Monday rejected the company’s appeal of a U.S. District Court for the District of Delaware decision last year invalidating four of the five patents protecting the company’s top-selling drug, the multiple sclerosis treatment Ampyra® (dalfampridine).
In July, the Federal Circuit denied Acorda’s motion for a preliminary injunction to prevent entities of Teva Pharmaceutical Industries, Mylan, and Hikma Pharmaceuticals from launching generic versions of Ampyra pending the appellate court decision. Last month, Acorda settled with Mylan, allowing it to market a generic Ampyra in the U.S. in 2025, “or earlier under certain circumstances,” and reached interim agreements with Teva and Hikma.
Alnylam Pharmaceuticals made history last month, when the FDA approved its first-in-class small interfering ribonucleic acid (siRNA) treatment Onpattro™ (patisiran) as the first therapy indicated for polyneuropathy caused by hereditary transthyretin-mediated amyloidosis (hATTR) in adults.
Alnylam also wowed investors May 8 by reporting positive preclinical results supporting its RNAi therapeutics for CNS disorders, for which the first IND is expected to be filed in late 2019 or early 2020. The company intends to create a CNS pipeline that includes Alzheimer’s, Huntington’s, and Parkinson’s diseases, as well as amyotrophic lateral sclerosis (ALS).
“The company presents a promising buyout opportunity for Sanofi given their ongoing partnership, and Sanofi’s strong R&D focus on biologics,” says Informa Pharma Intelligence. The companies’ longtime collaboration was restructured in January to give Alnylam global rights to Onpattro in return for royalties to Sanofi Genzyme, which gained global rights to RNAi candidate fitusiran for hemophilia A and B, in return for royalties to Alnylam.
Onpattro is the second hATTR treatment to gain approval this summer. On July 11, Akcea Therapeutics and Ionis Therapeutics announced European authorization for Tegsedi (inotersen) for stage 1 or stage 2 polyneuropathy in adults with hATTR. Tegsedi is under FDA review with a target PDUFA decision date of October 6.
“I believe the RNA space will be a big one, so both companies should have room to thrive. Nor would I be surprised if one or the other or both become acquisition targets for a large cap pharma company,” William P. Meyers of OpenIcon.com wrote in Seeking Alpha on August 21.
Every time GEN has compiled a list of takeover targets, stretching back to the first one in 2013, BioMarin Pharmaceutical has been one of the companies mentioned. The company has built a portfolio of seven marketed therapies and a pipeline of additional rare-disease drugs and gene therapies, with projected 2018 revenues of between $1.47 billion and $1.53 billion. Yet BioMarin also expects to keep losing money this year, projecting GAAP net losses of between $115 million and $165 million—explaining why analysts have declared BioMarin a perennial candidate for M&A.
“The M&A case here makes some sense,” Vince Martin wrote in InvestorPlace. “A larger acquirer could add growth from BioMarin’s drugs and cut costs to turn the company profitable.”
Informa Pharma Intelligence in May pinpointed Sanofi as a most likely buyer since BioMarin poses a “low-risk” acquisition for the pharma giant given a portfolio that is expected to grow. “Companies like Gilead, Amgen, and Roche might be interested in buying BioMarin,” Zacks Equity Research speculated in April.
By 2020, Informa Pharma Intelligence expects BioMarin to gain approvals for vosoritide (BMN 111), an analog of CNP indicated for achondroplasia, and valoctocogene roxaparvovec (val rox or BMN 270; a gene therapy Factor VIII for hemophilia A that has shown positive Phase II data). Informa Pharma Intelligence expects val rox to “transform the hemophilia A treatment space by providing a potential one-time cure for the disease.” But the price of val rox is expected to be a steep approximately $1.5 million per patient in the U.S.
Clovis Oncology is one of three companies with approved poly (ADP-ribose) polymerase (PARP) inhibitor treatments on the market: Rubraca® (rucaparib) is indicated for patients with deleterious BRCA mutation (germline and/or somatic) -associated advanced ovarian cancer, who have been treated with two or more chemotherapies and selected for therapy based on an FDA-approved companion diagnostic.
Clovis “seems to near the top of every analyst firm’s top potential biotech buyout list,” Bret Jensen wrote March 17 in TheStreet.com. “In addition, they see a nice ramp up of indications Rubraca will be approved for in the years ahead.”
Jensen, who has taken a “long” investment position in Clovis, wrote August 7 in Seeking Alpha: “Clovis has been a frequent target of buyout speculation in the past and still makes a logical buyout should ‘animal spirits’ return to that part of the market.”
That speculation was enhanced, he said, by Clovis meeting expectations of additional approvals for Rubraca. In April, the FDA approved the additional indication of maintenance treatment of adult patients with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to platinum-based chemotherapy. That was followed in May with European Commission approval for recurrent ovarian cancer.
Merrill Lynch analyst Tazeen Ahmad, according to 24/7 Wall St., noted that Clovis may enhance its M&A appeal to analysts this fall, as it expects to report interim data from the Phase II TRITON2 trial in prostate cancer at European Society for Medical Oncology conference in October.
Several times this year, market watchers pegged Incyte among companies likely to be acquired. Goldman Sachs identified Incyte as one of 15 companies most aggressively positioned for a takeover. Zacks Equity Research cited Incyte’s strong portfolio focused on cancer treatments.
“Incyte’s strong oncology portfolio makes it an attractive pick for companies, namely Gilead [Sciences], Amgen and Bristol-Myers [Squibb],” Zacks asserted. “The primary reason why Incyte is ready for buyout is because of the encouraging performance of its two marketed products.”
Incyte markets Jakafi® (ruxolitinib) for myelofibrosis and polycythemia vera (PV), and Iclusig® (ponatinib) for forms of chronic myeloid leukemia and Philadelphia chromosome–positive acute lymphoblastic leukemia. During Q3, Incyte plans to file a supplemental NDA with the FDA to add a new indication, steroid-refractory acute graft-versus-host disease (GVHD), following success in the pivotal REACH1 trial (NCT02953678).
For the first half of this year, Jakafi net product revenue jumped 25% over January–June 2017, to $659.344 million. Iclusig revenue zoomed 39%, to $40.685 million.
Todd Hagopian—whose Hagopian Institute BioMed Extreme Value (HIBEV) biotech fund at Marketocracy last year returned 38%—predicted: “Look for someone to go after the strongest independent player in the IDO [Indoleamine 2,3-dioxygenase] Inhibitor market, where [Incyte] will likely demand a price above $150 in a buyout scenario. Hagopian told Marketocracy founder and CEO Ken Kam in Forbes that Incyte was supposed to have been bought by Gilead Sciences, before Gilead “unexpectedly” acquired Kite Pharma instead, in an $11.9 billion deal completed October 3, 2017.
Intercept Pharmaceuticals found itself making headlines in June after Dealreporter cited unnamed sources as quoting Bristol-Myers Squibb (BMS) SVP and head of business development Paul Biondi that the pharma giant was “very interested in the fibrosis space, both in liver and lung,” and was actively pursuing acquisition or licensing opportunities.
Potential acquisition targets, according to the publication, were two drug developers focused on fibrotic diseases—Intercept and Genfit. Intercept’s stock surged 19% in the two weeks that followed, from $71.73 the day before the Dealreporter story, to $85.67 on June 22.
“While a near-term acquisition is unlikely, the company does have an intriguing pipeline and is seeing revenues rise nicely on its one approved product,” Bret Jensen observed in Seeking Alpha.
That product is Ocaliva® (obeticholic acid), indicated for primary biliary cholangitis (PBC) in combination with ursode oxycholic acid (UDCA). For the first half of 2018, Ocaliva net product revenue rose 53%, to $78.327 million from $51.044 million in January–June 2017, Intercept reported August 2. Four days later, Goldman Sachs upgraded its rating on the company’s stock from “sell” to “buy.”
Fibrosis is one of BMS’ therapeutic areas, hence the pharma’s potential interest. And BMS could do a lot worse than Intercept Pharma, given Ocaliva’s rising sales and the company’s pipeline, which is led by a Phase III treatment for nonalcoholic steatohepatitis (NASH), with plans to report topline data in patients with advanced liver fibrosis from the REGENERATE trial (NCT02548351) in the first half of 2019.
In February, Bristol-Myers Squibb (BMS) agreed to co-develop Nektar Therapeutics’ lead immuno-oncology program NKTR-214 in combinations with BMS’ cancer immunotherapy Opdivo® (nivolumab), as well as with Opdivo and BMS’ Yervoy®(ipilimumab), in more than 20 indications across 9 tumor types.
“Nektar presents a potentially lucrative takeover target in the cancer combination immunotherapy space” for BMS, according to Informa Pharma Intelligence, since BMS already owns 5% of Nektar and needs to boost the long-term growth potential of Opdivo.
Nearly two weeks before the BMS-Nektar deal, Bloomberg reported Nektar was exploring options that included a sale, citing unnamed sources. “Nektar has attracted interest from larger drugmakers, though some potential suitors are wary of a full takeover because of the high valuation and risks related to its pipeline of experimental drugs,” according to Bloomberg.
Nektar shares fell 42% on June 4, to $52.57 from $90.35, after it reported preliminary data from the PIVOT Phase I/II study showing that the combination of NKTR-214 and Opdivo yielded a decline in response rates between the first and second stages—from 85% to 50% in melanoma patients, and from 64% to 46% in renal cell carcinoma (RCC) patients.
Nektar said it expected responses to improve as patients added in the second stage stay on the treatment longer. Several analysts agreed, including Mizuho securities analyst Difei Yang, who according to TipRanks projected that response rates will rebound to 57% for melanoma and 58% for RCC. Most analysts held off downgrading Nektar stock, which has since rebounded to $68.49 on September 4.
Sarepta’s success in launching Exondys 51™ (eteplirsen), a phosphorodiamidate morpholino oligomer (PMO)-based RNA-targeted therapy, the first FDA-approved therapy for Duchenne muscular dystrophy (DMD), last year catapulted the company to takeover target status. Sarepta has generated similar buzz for its sales of Exondys 51 and its pipeline development efforts: By year’s end, Sarepta is expected to file an NDA for its second antisense treatment for DMD, golodirsen, indicated for DMD patients with genetic mutations subject to skipping exon 53 of the DMD gene.
“Wall Street is betting that Sarepta is on its way to developing a lucrative portfolio of DMD drugs and that it could be a takeover candidate,” Barron’s exclaimed May 5, noting that the company’s shares had tripled over the previous year, to $89.75. They have since risen to $143.45 on September 4.
“Sarepta could be on Biogen’s M&A target list,” wrote Informa Pharma Intelligence. “DMD fits with Biogen’s focus on neuromuscular disease.” But Keith Speights in The Motley Fool cautions that Sarepta could be a costly acquisition: “Sarepta would probably require a sky-high premium from a suitor in order to get a deal done, and that fact bodes well for its future valuation.”
In DMD, Sarepta reported positive preliminary clinical data in June from a Phase I/IIa trial (NCT03375164) assessing AAVrh74.MHCK7.micro-Dystrophin—only to have the FDA place a clinical hold on the trial in July; Sarepta has vowed to resolve the issue rapidly.
Sarepta also plans to expand beyond DMD, shelling out potentially $38 million-plus for exclusive rights to a Lacerta Therapeutics Pompe disease treatment, plus options for two undisclosed Lacerta candidates.
Like Clovis Oncology (see above), Tesaro has an approved PARP inhibitor treatment. Tesaro’s once-daily, oral PARP inhibitor Zejula™ (niraparib) won FDA approval last year as a maintenance treatment for women with recurrent epithelial ovarian, fallopian tube, or primary peritoneal cancer who responded to platinum-based chemotherapy.
On June 20, Tesaro stock jumped 16% after Intereconomia.com reported that Roche offered to acquire the company. “We believe that Tesaro could also be an acquisition target for a larger biopharmaceutical company, given its progress in drug development, strong market position, and reduced valuation,” John Eade, chairman and CEO of Argus Research Group, wrote on July 16.
However, Investors.com quoted RBC analyst Kennen MacKay, who concluded that a Roche-Tesaro combination was unlikely “given what we see as a lack of a compelling strategic rationale” and the likelihood of a reduced revenue guidance for 2018.
MacKay was proven right August 2, when Tesaro cut its revenue guidance to between $250 million and $265 million (from $310 million to $345 million), citing in part tempered expectations for the market penetration of PARP inhibitors.
While Zejula revenue quadrupled during January–June 2018 to $102.763 million from $25.945 a year earlier, sales have underperformed expectations: “A likely acquirer might be concerned around slow initial sales of Zejula,” Bret Jensen wrote in TheStreet.com on March 17, disclosing a “long” investment position on Tesaro.
The entire PARP inhibitor class is seeing slower physician acceptance than expected, Tesaro CEO Lonnie Moulder told analysts: “This is a different paradigm, and it’s a slower uptake. But it will get there.” Investors sent the share price falling 23.6%, to $26.97.
Rising revenues for its marketed drugs, recent approvals for additional indications, and an ambitious pipeline have kept the proverbial spotlight on Vertex Pharmaceuticals as a buyout candidate. Merrill Lynch spotlighted the company among biopharmas ripe for takeout, while Bloomberg columnist Max Nisen said the company was among several suitable acquisition options for Pfizer.
Earlier this year, Seeking Alpha contributor “DoctorRx” opined: “VRTX could deliver as a continued stand-alone company or it could be taken out by a Big Pharma player.”
Vertex’s cache among would-be buyers was enhanced by several developments this summer. On July 25, Vertex reported a 46% year-over-year jump in cystic fibrosis (CF) product revenues, to $750 million, and raised its CF product revenue projection for 2018 from $2.9 billion to $3 billion.
That was followed August 7 by an FDA label expansion for Orkambi® (Kalydeco® [ivacaftor] and lumacaftor) allowing use in children ages 2 to 5 with CF who have two copies of the F508del-CFTR mutation. A week later, Kalydeco’s label was also expanded to enable use in children with CF ages 12 to <24 months with at least one mutation in their CF transmembrane conductance regulator (CFTR) gene.
And on August 31, when the company and partner CRISPR Therapeutics quietly disclosed that they had begun recruiting patients for the first clinical trial of the gene-editing technology sponsored by U.S. companies. The Phase I trial (NCT03655678) will assess the safety and efficacy of CRISPR-Cas9 modified CD34+ human hematopoietic stem and progenitor cells using CRISPR Therapeutics’ CTX001, which is in development for both β-thalassemia and sickle cell disease.