Horizon Therapeutics has agreed to acquire Viela Bio for approximately $3.05 billion, the companies said today—less than three weeks after Horizon president and CEO Tim Walbert told GEN that his company intended to expand its pipeline through mergers and acquisitions and beef up its R&D this year.
Both goals, Horizon said, will be satisfied by the company’s purchase of Viela Bio, a spinout of AstraZeneca’s former MedImmune subsidiary launched in 2018 with $250 million in capital.
“This acquisition represents a significant step forward in advancing our strategy— to expand our pipeline in order to accelerate our growth over the long term,” Walbert said today in a statement.
Dublin-headquartered Horizon is a rare and rheumatic disease drug developer unrelated to Horizon Discovery Group, the gene editing and gene modulation tool company that was acquired last year by PerkinElmer for approximately $383 million.
Viela Bio, which develops treatments for autoimmune and severe inflammatory diseases, is headquartered in Gaithersburg, MD, where MedImmune was based and where acquirer AstraZeneca maintains a significant laboratory campus.
Viela Bio’s pipeline consists of nine development programs involving four therapeutic candidates led by Uplizna® (inebilizumab-cdon), a CD19-directed B-cell-depleting humanized monoclonal antibody marketed to treat neuromyelitis optica spectrum disorder (NMOSD) in adults who are anti-aquaporin-4 (AQP4) antibody positive. Uplizna is in also in Phase III trials for two additional indications, myasthenia gravis and IgG4-related disease. Viela has paused a Phase II study of UPLIZNA in kidney transplant desensitization, citing COVID-19.
Also in Viela Bio’s pipeline:
- VIB4920, a fusion protein designed to block a key co-stimulatory pathway involved in many autoimmune and inflammatory disease. VIB4920 is in a Phase IIb trial in Sjögren’s syndrome and Phase II trials for kidney transplant rejection and rheumatoid arthritis.
- VIB7734, a human monoclonal antibody designed to deplete plasmacytoid dendritic cells (pDCs), a cell type considered critical to the pathogenesis of multiple autoimmune diseases. VIB7734 is in a Phase II trial for systemic lupus erythematosus (SLE) set to start in the first half of 2021, and a Phase 1 study in COVID-19-related acute lung injury.
- VIB1116, a monoclonal antibody for autoimmune diseases expected to begin Phase I first-in-human trial in mid-2021.
Those candidates would join Horizon’s pipeline, which is anchored by Tepezza® (teprotumumab-trbw) and Krystexxa® (pegloticase). Tepezza, the first to date only therapy approved for treating thyroid eye disease, won approval in January 2020 and finished last year exceeding $800 million in net sales. Krystexxa, approved in 2010 to treat chronic gout in adults refractory to conventional therapy, racked up more than $400 million in net sales.
$3.5B Peak sales forecast
Last year and again at the recent virtual J.P. Morgan 39th Healthcare Conference, Walbert has projected that Tepezza will generate $3.5 billion in peak global annual net sales, while Krystexxa is expected to achieve peak net sales of $1 billion. The company hasn’t said when those sales peaks are expected to be reached.
Tepezza’s ability to deliver on sales expectations will depend on how quickly it can resolve supply crunch affecting the drug. In announcing the Viela Bio acquisition, Horizon also said it submitted last week a prior approval supplement to the FDA to support increased scale production of Tepezza, with data intended to support more product output with each manufacturing slot than is currently approved by the FDA. The supply shortage is expected to last through the first quarter.
Horizon’s pipeline also includes HZN-825, a Phase II oral selective lysophosphatidic acid receptor 1 (LPAR1) antagonist that has shown early signs of positive benefit in several fibrotic conditions; and three gout treatments in preclinical discovery phases, HZN-003, HZN-007, and HemoShear Gout.
“Adding Viela’s research and clinical development capabilities along with its deep, mid-stage biologics pipeline to our seasoned R&D and commercial teams, advances our transformation to an innovation-driven biotech company where we will build on the success of Tepezza and Krystexxa to bolster our long-term growth trajectory,” Walbert stated. “We intend to maximize the full potential of Viela’s pipeline, including the pursuit of additional future indications.”
At the J.P. Morgan conference, Walbert also presented Horizon’s plans for six new clinical programs this year, raising its total to 14. Two programs are set to start in the first half of this year and involve Krystexxa.
The company plans an open-label trial to assess whether the drug can be dosed for once a month use with methotrexate, to treat people with uncontrolled gout. Krystexxa is now indicated for dosing every other week.
Horizon also plans another open-label trial designed to evaluate Krystexxa with methotrexate in patients who previously failed to show improvement with the drug alone. The study aims to evaluate whether patients can benefit from the combination treatment after developing an immune response to Krystexxa.
Two other programs involve Tepezza—a randomized, controlled trial in chronic TED, expected to begin in the second quarter; and an exploratory Phase I trial in diffuse cutaneous systemic sclerosis, set to start mid-2021.
$140M Pre-EBIDTA reduction
Horizon said it anticipated the Viela Bio purchase will reduce its adjusted earnings before interest taxes, depreciation, and amortization (EBITDA) by approximately $140 million this year, nearly all of which is attributable to increased R&D investment.
In a conference call with analysts today, Walbert noted that Viela Bio’s 170 employees include about 60 in R&D.
“This will meaningfully augment our current R&D team of approximately 150 employees,” Walbert said. “We are committed long‐term to maintaining and building upon the Viela presence in the Gaithersburg, Maryland area as well.”
Speaking with GEN on January 13, Walbert said Horizon intended to expand its R&D spending as well as its pipeline using the $2.08 billion in cash and cash equivalents Horizon accumulated at the end of 2020, double the $1.076 billion it had at the end of 2019.
Horizon said it will use part of its cash on hand, plus $1.3 billion of external debt, to finance the Viela Bio acquisition. Horizon identified Citigroup Global Markets and Morgan Stanley Senior Funding as the sources of the fully committed financing that it has put in place for the transaction.
At $53 per share cash, the acquisition deal represents a fully diluted equity value of approximately $3.05 billion, or approximately $2.67 billion net of Viela’s cash and cash equivalents. The deal is structured as a two-step cash tender offer for all issued and outstanding shares of Viela Bio common stock. Following successful completion of the tender offer, Horizon will acquire all remaining shares not tendered in the offer through a second step merger at the same price per share as in the tender offer.
The transaction is expected to close by the end of the first quarter of 2021. The boards of both Horizon and Viela have approved the deal, which is subject to satisfying customary closing conditions that include the expiration or termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976. Stockholders holding approximately 54% of the outstanding shares of common stock of Viela, including AstraZeneca, have agreed to tender their shares in the offer pursuant to support agreements.