Ono Pharmaceutical has agreed to acquire Deciphera Pharmaceuticals for $2.4 billion, the companies said today, in a deal designed to grow the buyer’s oncology portfolio with an approved therapy, a second cancer treatment expected to begin regulatory review this year, and expertise in developing kinase inhibitors.

Deciphera markets Qinlock® (ripertinib), a switch-control kinase inhibitor indicated for treatment of fourth-line advanced gastrointestinal stromal tumor (GIST) in adults who have received prior treatment with three or more kinase inhibitors—including imatinib, the cancer drug marketed as Gleevec® by Novartis and as any of several generic versions, the first of which (by Sun Pharmaceuticals) was approved by the FDA in December 2015.

Qinlock—which is approved in the U.S. and more than 40 other countries—generated $159.1 million in net product revenue last year, accounting for nearly all (97%) of the $163.4 million in total revenue garnered by Deciphera.

“For Qinlock, we are confident the drug can reach 2024 cons[ervative] sales of $195M and eventually generate $500M of peak sales in 2L/4L GIST across the U.S./EU (in-line w/ mgmt’s U.S.-only guidance of $400M),” Andrew Tsai, an equity research analyst with Jefferies, wrote today in a research note.

Tsai based his optimistic forecast on:

  • The longer duration of therapy in fourth-line GIST towards 8.5 months seen in real-world conditions, compared with the 6.3-month progression-free survival seen in clinical studies).
  • Growing European Union sales in fourth-line GIST, and the prospect of an increased stock price if European sales beat forecasts.
  • The expectation of U.S. price increases.
  • Increased off-label use in second-line GIST, which Tsai said should bring a longer 20-month treatment duration.
  • The prospect of accelerated sales starting in 2026 if the FDA approves Qinlock in second-line treatment of patients with GIST who harbor mutations in exon 11 and 17/18 of the proto-oncogene encoding the receptor tyrosine kinase protein KIT.

Deciphera aims to grow its revenue in part through approval of a second cancer drug, vimseltinib (DCC-3116), an oral, highly selective switch-control kinase inhibitor of CSF1R. Earlier this year, Deciphera said it planned to submit a New Drug Application (NDA) seeking FDA approval of vimseltinib during the second quarter, to be followed in the third quarter by submission of a Marketing Authorisation Application to the European Medicines Agency (EMA).

Positive phase III data

Last October, Deciphera reported positive data from the Phase III MOTION trial (NCT05059262) assessing vimseltinib in patients with tenosynovial giant cell tumor (TGCT) not amenable to surgery. Vimseltinib met the trial’s primary endpoint of statistically significant and clinically meaningful improvement versus placebo in overall response rate (ORR) at Week 25.

In the MOTION trial’s intent-to-treat population, the ORR at Week 25 was 40 percent for the vimseltinib arm, compared with zero percent for the placebo arm.

Still ongoing is the trial’s open-label Part 2 portion, in which patients from both the vimseltinib and placebo arms receive treatment with vimseltinib. Deciphera says its data from vimseltinib holds potential for the drug to be a best-in-class and first-in-class agent for the treatment of TGCT and potentially other indications.

Also in Deciphera’s pipeline:

  • DCC-3084, a Phase I pan-rapidly accelerated fibrosarcoma (RAF) inhibitor being developed to treat solid tumors and blood cancers.
  • DCC-3009, a pan-KIT inhibitor being developed to treat GIST, now in the IND-enabling phase.
  • Integrated Stress Response (ISR) program, a research-phase general control nonderepressible 2 (GCN2) kinase activator being developed to treat solid tumors.

“Together, we expect to advance and accelerate each organization’s important work through combined research and development capabilities and a global commercial footprint,” Deciphera president and CEO Steven L. Hoerter said in a statement. “Importantly, this acquisition delivers for all of Deciphera’s stakeholders. It provides immediate, compelling value for our shareholders, provides greater opportunities for our world-class team, and ultimately, greater hope for patients.”

Investors appeared to share Hoerter’s enthusiasm for the deal with a buying surge that sent Deciphera’s share price soaring 72% in afternoon trading, to $25.23 as of 1:15 p.m. from $14.65 at the closing bell Friday.

As of January 31, Deciphera had approximately 355 employees located in approximately 30 U.S. states and five countries in Europe, according to the company’s Form 10-K annual report for 2023, filed February 7. Approximately 150 employees are located at Deciphera’s Waltham, MA, headquarters, while about 40 employees are based at its research facility in Lawrence, KS, and some 15 employees are based at its European commercial headquarters in Zug, Switzerland.

Growing net loss

Deciphera finished 2023 with a net loss of $194.942 million, which grew nine percent from a net loss of $178.931 million in 2022, on revenue that grew 22% year-over-year to $163.356 million from $134.036 million, driven by Qinlock’s 27% one-year jump in net product revenue from $125.5 million in 2022. Deciphera blamed the widening net loss on rising costs of sales, R&D,  and selling, general, and administrative (SG&A) expenses when it reported fourth quarter and full-year 2023 results on February 6.

Ono plans to acquire all outstanding shares of Deciphera common stock for $25.60 per share in cash through a tender offer, followed by a merger of Deciphera with a wholly owned subsidiary of Ono. The purchase price represents a 74.7% premium to Deciphera’s closing share price of $14.65 on Friday, and a 68.8% premium to Deciphera’s 30-trading-day volume weighted average price, also as of Friday.

Ono said it will “promptly” commence the tender offer, which is set to expire in 20 business days unless extended. Upon successful completion of the tender offer, Ono’s wholly owned subsidiary will merge with and into Deciphera, with Deciphera continuing as the surviving corporation and a wholly owned subsidiary of Ono. Deciphera will operate as a standalone business of Ono Group and remain based in Waltham.

Any shares of common stock of Deciphera not tendered into the offer will receive the same price per share as in the tender offer.

The acquisition is expected to close in the third quarter, subject to customary closing conditions, that include U.S. antitrust clearance and the tender of a majority of Deciphera’s outstanding shares of common stock.

According to Ono and Deciphera, stockholders that own approximately 28% of the outstanding shares of Deciphera’s common stock have agreed to tender all of their owned shares in the offer by entering into entered into Tender and Support Agreements.

“Deciphera and ONO share a deep commitment to improve the lives of people living with cancer, and the transaction announced today enables us to make even greater impact for patients,” Hoerter added. “I am excited about the future of the combined organization, and we are honored to contribute to the continued growth of Ono in the U.S. and around the world.”

The planned acquisition is Ono’s second cancer-focused collaboration in as many weeks. On Thursday, Ono announced a drug discovery agreement with another Japan-based drug developer, PRISM BioLab, to develop novel oncology candidates targeting an unspecified protein-protein interaction target to be selected by Ono using PRISM’s PepMetics® technology platform.

Ono agreed to acquire exclusive worldwide rights to develop and commercialize small molecule compounds generated through the collaboration, in return for paying PRISM an upfront fee; research funding; payments based on achieving research, development, and commercialization milestones; and tiered royalties based on net sales—all of them undisclosed.

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