Medius Deal Watch
Annual Review 2015
Annual Review 2015 © Medius Associates Ltd www.medius‐associates.com www.medius-associates.com
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Annual Review 2015 Medius Deal Watch
Annual Review 2015
Execu ve Summary
The deals of 2015 encompassed both the tradi onal and some new trends. The era of the mega‐merger is s ll with us, as witnessed by the Pfizer‐Allergan deal. The Shire‐Baxalta deal, at $32bn only a frac on of the $160bn Pfizer‐
Allergan deal, has not yet been finalised, but 2015 saw a significant number of mul ‐billion dollar deals as the trend from licensing towards acquisi on con nued. The availability of financing also had an impact on early stage deals, as biotech companies (par cularly in the US) raised money from shareholders to be able to take products further in development. We noted several companies being par cularly ac ve during 2015: AstraZeneca, as it bolstered its posi on against acquisi on, completed deals across a range of areas and phases; Shire, as it spent the $1.6bn break‐up fee it received from AbbVie; Sanofi, with a very substan al deal in the consumer health care space – the $5.1bn acquisi on of Boehringer Ingelheim’s consumer products; and Hanmi, with 4 deals with headline payments totalling $6.6bn. Asset swaps remain popular, as companies use such deals to focus their por olios. Almirall used the cash from dives ng its respiratory por olio to invest in dermatology; Sanofi exchanged Merial for Boehringer Ingelheim’s consumer por olio; BioMarin exchanged a product in phase 3 development (talazoparib) for 2 marketed products (Kuvan and pegvaliase); and Novar s exchanged 3 phase 2 assets for equity in the newly‐founded company Mereo. Looking at the deals from the therapeu c area view, immuno‐oncology con nued to be a significant focus, par cularly as companies with launched and late stage assets seek deals to facilitate the use of their products within mul ‐product regimens. At an earlier stage companies with rights to CRISPR/Cas‐9 technology, including CRISPR Therapeu cs, Editas Medicine, Intellia Therapeu cs and Caribou Biosciences, have emerged as ac ve deal makers for therapeu c discovery and development. We are also seeing co‐opera ons in areas which have historically been challenging, such as pain and Alzheimer’s Disease. Gene therapy has seen a resurgence this year with several transac ons in this area, including uniQure's deal with BMS for cardiovascular targets. Open innova on is featuring between Big Pharma companies such as Sanofi and AstraZeneca who in November elected to open their libraries of some 210,000 compounds to allow each to screen for ac vity. The pressure is on around pricing of pharmaceu cal products and deal terms need to absorb the impact on both par es; for example by linking royal es to transfer prices. In the generics field, a clear line between the stayers, such as Teva, Sandoz, and the Indian companies including Cipla and Sun Pharma, and the leavers, such as Boehringer Ingelheim and UCB, is appearing. The Indian companies are also inves ng in acquiring manufacturing facili es and capabili es as Big Pharma reduces its direct interest in manufacturing. Once the FDA restric ons on certain Indian companies are resolved, we expect to see the trend for these companies to invest in facili es, both in India and overseas, to con nue. Finally, we noted in 2015 a con nua on of the use of op ons and other crea ve deal structures. Both Sanofi and AbbVie purchased priority review vouchers (PRVs) for substan al sums. Synthe c royalty financings, such as those constructed by Intarcia Therapeu cs and Immunogen, are enabling companies to op mise their fundraising through deal making. © Medius Associates Ltd www.medius-associates.com
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Annual Review 2015 Medius Deal Watch
Annual Review 2015
Introduc on
Deal making environment
In 2015 the availability of funds from shareholders (at least in the US) has enabled companies to pay for their proprietary product developments with IPOs or further rounds of fundraising. Consequently, the environment for partnering deals has become substan ally more compe ve as some companies choose to support their assets through to later value inflexion points rather than partner their assets at an early stage, resul ng in fewer assets being available to license. Strategies
The drivers of major deals in 2015 have been access to innova on, pipeline strengthening, defence against hos le bids, corporate focus and tax inversions. In the case of innova on, we note the high number of deals which closed in the oncology / immuno‐oncology space; these accounted for some 27% of the deals captured in our data set this year. Sanofi was a major player in strengthening its pipeline, and in par cular added to its diabetes and oncology por olios through deals with Hanmi and BioNTech. Illustra ng a strategy to defend itself against hos le bids, AstraZeneca ends 2015 in a substan ally stronger posi on, with 20 inward deals following the failed acquisi on a empt by Pfizer in 2014. The trend to focus on fewer areas without diminishing the asset base by means of assets swaps was also evident as a strategy for some companies (Sanofi‐Boehringer and GSK‐BMS) as was the con nued divestment of peripheral interests and ac vi es. It is always interes ng to look back over the year to see those companies that have been very ac ve on the deal front and those which have not featured so heavily in the monthly Deal Watch reviews. Arguably, not doing deals can reflect a healthy pipeline and solid business base, so this is not in any sense a cri cism. This year 3 of the top 20 pharma companies (AbbVie, Bayer and Merck KGaA) have not been very evident in the headlines. In contrast, those companies which depend on deals to drive the business, for example, Celgene, have closed as many deals as several top mul na onals. However, this year’s outstanding leader in deals performed is AstraZeneca with some 32 completed deals both in and outward facing. Pricing
Drug pricing has hit the headlines beyond the industry press this year with the Turing Pharma debacle (the price of Daraprim was increased by 5000%) possibly represen ng the final straw. Payers con nue to demand further evidence of cost benefits associated with innova ve products and to be unwilling to pick up the tab for the newer more expensive therapies. Consequently, at the sharp end of the business, product price will inevitably have an impact on deal terms. © Medius Associates Ltd www.medius-associates.com
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Annual Review 2015 Medius Deal Watch
Annual Review 2015
Top Acquisi ons
Corporate acquisi ons
Acquisi ons s ll appeared to be very much on trend throughout 2015 with eye watering headline values being offered by companies eager for a quick gain in turnover or a pipeline fix. So why are these so popular? There are several reasons, at present money is compara vely cheap. Certainly with a limited number of assets available (par cularly late stage assets) the prices being charged for in‐licensed products means that acquisi ons make sense, especially as these bring the benefits of complete ownership. It remains cheaper to buy an asset than build and stepping in at a late stage carries a lower risk. In the race for innova on and where companies are re‐focusing of pipelines, acquisi ons offer an instant remedy. No review of 2015 would be complete without men oning the Allergan‐Pfizer deal, which has established a new high for the industry with its headline value of $160bn. This deal comes hot on the heels of the acquisi on of Hospira earlier in the year for $17bn, showing that Pfizer has money to spend, and tops the industry’s previous largest deal, when Pfizer purchased Warner Lambert for $116bn in 2000. The Allergan‐Pfizer deal will create the world’s largest drug company and will move the company’s HQ to Ireland, thereby represen ng massive savings by reducing the average tax from 25% to 15%*. A emp ng to avoid restric ons on reaching closure, the deal is structured so that Allergan buys Pfizer crea ng a new company Pfizer Plc with sales of ~$64bn. Medius an cipates a substan al number of deals emerging from the combined company in 2016, as there will be considerable fall out of product assets, staff and plant to deliver the expected costs savings and synergies in the new business. However it is not only the major companies who are engaged in acquisi ons. Big biotechs such as Celgene and Alexion have also been busy purchasing companies as noted below. Alexion’s acquisi on of Syngeva consolidates its interests in rare diseases, which has proved to be a very crowded field this year. Bringing a strong pipeline with late stage assets and 4 programmes due to enter the clinic, this is a perfect strategic fit. Similarly for Celgene, the acquisi on of Receptos, whose immunotherapy product ozanimod is poised to be the first S1P receptor modulator to be approved in IBD, is a significant boost to Celgene’s GI por olio. At the top of last year’s table Shire has executed a range of deals (4 company acquisi ons), happily spending the $1.64bn breakup fee it secured when the AbbVie deal did not close. However despite an ini al bid in August, the purchase of Baxalta remained ongoing, but may well happen as we move into 2016. Reviewing the table of top acquisi ons, several are in the generics space (for example Par‐Endo; Boehringer‐Hikma) but others signal a move to add speciality assets for example Valeant‐Salix and Teva‐Auspex. The former deal with an enterprise value $14.5bn gives Valeant a leading posi on in the GI market in the US. Similarly the merger with Auspex adds to Teva’s CNS interests with SD 809 in phase 3 for Hun ngton’s.
*US corporaƟon tax is 35% Ireland has corporaƟon tax of 12.5%
© Medius Associates Ltd www.medius-associates.com
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Medius Deal Watch
Annual Review 2015
Table 1 : Company M&A Deals Over $2.5bn Headline Values Announced During 2015
Headline
$bn Target Acquirer Business Area Allergan Pfizer Acquisi on of business 160 Pharmacyclics AbbVie Builds oncology franchise with Imbruvica (BTK inhibitor) 21 Hospira Pfizer Injectable drugs and infusion technologies; a global leader in biosimilars 17 Salix Valeant GI products including irritable bowel syndrome drug Xifaxan 14.5 Synageva BioPharma Alexion Por olio of rare disease products including Kanuma for LAL Deficiency (pre‐reg) and SBC‐103 for MPS IIIB (phase1/2) 8.4 Par Endo Por olio of generics plus technology pla orm and manufacturing 8.05 Receptos Celgene Dyax Corp Shire NPS Shire Builds inflamma on/immunology por olio with ozanimod (oral, once
‐daily, selec ve sphingosine 1‐phosphate 1 and 5 receptor modulator (S1P)) Acquisi on brings Kalbitor (mktd) for acute a acks of HAE plus DX‐
2930, phase 3 ready mAb targe ng pKal Specialist rare disease company includes the lead product Ga ex (teduglu de) for short bowel syndrome 7.2 5.9 5.2 Acerta Pharma AstraZeneca Majority investment (op on to acquire remaining equity) brings BTK inhibitor, acalabru nib ACP‐196 in phase 3 4 Auspex Teva Merger which brings deuterium technology and phase 3 asset SD‐809 in Hun ngton’s 3.5 Amdipharm Mercury Concordia Healthcare Acquisi on of speciality pharma company extending geographic outreach and product pla orm. 3.5 BI Roxane Laboratories Hikma Acquisi on of US specialty generics company including manufacturing supply chain. BI remains a shareholder in Hikma ZS Pharma AstraZeneca All cash tender acquisi on includes lead product ZS‐9 (pre‐reg) a potassium‐binding compound for hyperkalaemia © Medius Associates Ltd www.medius-associates.com
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Medius Deal Watch
Annual Review 2015
Asset acquisi ons
Although 2015 was not as busy as 2014 for asset acquisi ons, several of the major companies have been engaged in asset swaps as noted in the table below. Asset acquisi ons usually involve marketed product por olios or business segments of a large company that are no longer of strategic importance to the company. The acquirers are usually seeking to add to their exis ng por olio to improve market ranking and compe veness and to create cost synergies, for example, Teva’s acquisi on of Allergan’s generics business. The deal includes products, product pipeline, employees and manufacturing. This was an expensive acquisi on with the purchase price of $40.5bn represen ng 6x sales but Teva an cipates making $1.4bn of cost and tax savings. The combined business will, according to Teva, be ranked number 9 in the world by sales ($26bn) and make Teva the world leader in generics. This market posi on might be of some concern to the an ‐trust authori es and there are rumours Teva will be required to divest $1bn worth of products that overlap with the Allergan generics por olio, represen ng opportuni es for smaller companies to acquire non‐strategic assets. Another Big Pharma company using asset swaps to focus its business is Sanofi who has swapped its Merial Animal Health business for Boehringer Ingelheim’s consumer healthcare with a cash equaliser of €4.7bn. Sanofi’s combined consumer business sales are expected to be $5.5bn, which according to Sanofi will make it the “number one ranked player in consumer healthcare”. The remaining asset acquisi on deals are on a smaller scale but mostly are a result of companies seeking to bolster their por olio in their key therapy areas. For example, AstraZeneca, one of the most ac ve deal makers in the industry, has been steadily consolida ng its respiratory business. In 2014 it signed a $2.1bn deal with Almirall to acquire its respiratory business and in 2015 has acquired respiratory businesses from Takeda and Actavis (Allergan) for a total of $1.2bn. At the same me AstraZeneca has been focusing its opera ons by dives ng assets in its non‐
core, gastroenterology area. The company divested Entocort to Perrigo (for the US) and to Tillo s (for other territories). It also sold rights to its orphan drug treatment for thyroid cancer to the orphan specialist, Genzyme. Further, it sold its monoclonal an body in the overcrowded psoriasis market to Valeant. With the funds realised by the sale of its respiratory interests, Almirall strengthened its presence in dermatology by acquiring the Poli Group, a dermatology‐focused R&D company with formula on technology and 3 clinical stage projects. Leo, not a regular company in the deal headlines, has boosted its core business with the acquisi on of Astellas’s global dermatology business (excluding Protopic in Japan) for $0.72bn (3x sales). This is the largest transac on in Leo’s history and incremental sales will be 20% when the products have been fully transferred. Just as AstraZeneca has sought to strengthen and protect its respiratory business so GSK has done the same with its HIV business. In a therapeu c area where product combina ons are king, and peripheral players can find it hard to make inroads even with interes ng new agents, GSK has strengthened its ViiV Healthcare por olio through a deal with BMS. GSK has acquired the rights to BMS’s HIV pipeline products for up to $1.5bn, and the deal will also give GSK access to 2 late stage drugs (one in phase 3 with Breakthrough Therapy Designa on) and a preclinical pipeline to further develop the business. © Medius Associates Ltd www.medius-associates.com
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Medius Deal Watch
Annual Review 2015
Table 2 : Asset Deals Over $500m Headline Values Announced During 2015
Headline
$bn Target Acquirer Business Area Allergan Teva Acquisi on of Allergan Generics (Actavis) 40.5 Sanofi Boehringer Boehringer Sanofi Asset swap: Merial animal health business EV € 11.4bn Consumer health from BI to S EV € 6.7bn Gross cash from Boehringer to Sanofi €4.7bn 5.1 Asset purchase of Covis adding brands and generics 1.2 Divestment by Bayer of its Diabetes Care business including Contour™ por olio and other products 1.15 Divestment by J&J of US rights to Nucynta franchise 1.05 Bayer Diabetes Care Concordia Healthcare Panasonic Healthcare Janssen Depomed GSK Novar s Sigma Tau Baxter Covis Acquisi on of remaining rights to Arzerra (ofatumumab) with 12% royalty Purchase of Oncaspar (pegaspargase) product por olio for acute lymphoblas c leukaemia HIV por olio late stage including fostemsavir (BMS‐663068) in phase 3 which has Breakthrough Therapy Designa on Also including a matura on inhibitor (BMS‐955176), phase 2b. BMS‐
986173 a back‐up matura on inhibitor candidate is also included. 1.034 0.9 BMS ViiV / GSK Famy Care Mylan Astellas LEO Pharma BMS ViiV/ GSK HIV por olio early stage assets (pc and discovery) including BMS‐
986197, another matura on inhibitor, an allosteric integrase inhibitor and a capsid inhibitor. May include BMS employees 0.62 Actavis AstraZeneca Acquisi on of branded respiratory business in US and Canada 0.6 Takeda AstraZeneca BioMarin Mediva on Mylan acquires female healthcare businesses including generic oral contracep ve products, $750m in cash with $50m con ngent Acquisi on of Astellas global dermatology por olio including Protopic (except in Japan) for €675m Acquisi on of Takeda’s core respiratory business including roflumilast (Daliresp and Daxas) oral PDE 4 inhibitor in COPD Mediva on acquired talazoparib (BMN 673) an oral poly ADP ribose polymerase (PARP) inhibitor in phase 3 for breast cancer Merck Serono BioMarin Divestment / return of rights to Kuvan (sapropterin dihydrochloride) and pegvaliase with addi onal territorial rights in PKU for headline value €525m Hetero Drugs Cipla Cipla has purchased Hetero’s US businesses (Invagen and Camber) 0.835 0.8 0.724 0.575 0.57 0.564 0.55 BioMarin has used the cash generated from asset sales to acquire more strategically interes ng products. In August BioMarin sold talazoparib, a poly ADP ribose polymerase (PARP) inhibitor in phase 3 for breast cancer, to Mediva on for $410m upfront plus $160m in milestones plus royal es. Subsequently BioMarin purchased from Merck Serono rights to Kuvan (sapropterin dihydrochloride) and pegvaliase for an upfront payment of $372m plus milestones up to $200m. Thus the 2 deals were virtually the same headline value but BioMarin gained a marketed product in return for one in development. © Medius Associates Ltd www.medius-associates.com
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Annual Review 2015 Medius Deal Watch
Annual Review 2015
Top Licensing Deals
Table 3 below captures the top headline value licensing/collabora on deals closed during 2015. Sanofi was much in evidence busy protec ng its diabetes franchise with a range of deals at various stages of development. Other deal‐
ac ve companies include AstraZeneca, BMS and J&J. Interes ngly, Roche does not feature in our table as the headline values of the deals closed by the company were below our cut off value of $800m. Proving that licensing is not the sole domain of the major pharma, the table includes deals closed between mid‐cap companies, such as the Esteve and Mundipharma collabora on. Pain has always been an area where innova on is challenging; Esteve is bringing its R&D exper se in sigma‐1 receptor biology including the phase 2 asset E‐52862 for neuropathic pain and E‐58425 in phase 2 for post‐opera ve pain. If successful the value of the deal will exceed $1bn. During 2015 many companies have featured in the Medius monthly Deal Watch for the first me, for example the early stage (discovery) deal between Arcturus and Ultragenyx. This deal has a large headline value ($1.57bn) which comprises an upfront payment of $10m to Arcturus for an ini al 2 selected rare disease targets. Ultragenyx has the op on to add up to 8 addi onal rare disease targets during the research period with each target commanding development, regulatory and sales milestone payments of up to $156m with mid single to low double digit royal es on commercial sales. It is quite typical that the deals noted in Table 3 have headline values that are for mul ple programmes as well as con ngent payments so the headline figures may be even less realisable than usual. It is not surprising to note that in Table 3 there is only one phase 3 deal reported with a headline value > $800m as later stage deals tend to form part of a product or company acquisi on. Phase 3 deals are reviewed in a later sec on in this report. Moving to the licensor’s side, Korean‐based Hanmi Pharmaceu cal Company very effec vely established a high headline value for its deals bringing in 2 deals with headlines over $800m and closing deals with 4 major companies including Lilly, Janssen, Sanofi and Boehringer. The transac ons with J&J and Sanofi for cardiometabolic/diabetes assets and with Boehringer Ingelheim in oncology brought in nearly $600m in upfront payments. While the J&J and Boehringer Ingelheim deals carved out certain territorial rights for Hanmi in Korea and China, the Sanofi diabetes alliance is for global rights for 3 products with Hanmi holding an op on to its home markets. So 2015 has proved to be a very successful year for the company. © Medius Associates Ltd www.medius-associates.com
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Annual Review 2015
Table 3 : Licences and Collabora ons with Headline Values >$800m Product / Technology Hanmi/ Sanofi Licence to 3 diabetes products: long‐ac ng GLP‐1 agonist, weekly insulin and fixed‐dosed weekly GLP‐1‐RA/insulin combina on 2 4,259 437 Regeneron/ Sanofi Immuno‐oncology collabora on including PD‐1 inhibitor (p1) 1 2,170 640 Galapagos/ Gilead Licence to JAK1‐selec ve inhibitor, GLPG0634 2 2,075 725 Xencor/ Amgen Access to XmAb bispecific pla orm for use in 6 early stage programmes including one pc asset for mul ple myeloma Discovery 1,745 45 Colony s mula ng factor 1 receptor an body programme, Five Prime inc FPA008 (p1) in immunology/ oncology combined with Therapeu cs/ BMS Opdivo + other therapies 1 1,740 350 Lexicon Pharma/ Sanofi Licence to sotagliflozin oral dual inhibitor of sodium‐glucose cotransporters 1 and 2 (SGLT‐1 and SGLT‐2) 3 1,700 300 BioNTech/ Sanofi Discovery and development of up to 5 cancer immunotherapies, each a synthe c mRNA mixture Discovery 1,560 60 Innate Pharma/ AstraZeneca IPH2201, an NKG2A an body, in combina on with MEDI4736, an an ‐PD‐L1 immune checkpoint inhibitor 2 1,275 250 Arcturus/ Ultragenyx mRNA therapeu cs to rare disease targets using Arcturus’ UNA Oligomer chemistry and nanopar cle delivery; $156m per programme Discovery 1,570 10 Halozyme/ AbbVie Access to Enhanze pla orm to improve subcutaneous delivery Pla orm 1,193 23 Epithelial sodium channel (ENaC) inhibitors including P‐1037 and P‐1055 2 1,170 80 Licence to lead HCV assets which include ACH‐3102, ACH‐
3422 and sovaprevir 2 1,100 nd Collabora on for gene therapies in ophthalmology 1 1,065 124 1,000 nd 1,000 1000 1,000 nd Discovery 941 115 Parion Sciences/ Vertex Therapeu cs Achillion Pharma/ J&J AGTC/ Biogen Status Headline Upfront
$m $m Licensor/ Partner Esteve/ Mundipharma Collabora on in pain including E52862 and next genera on 2 products 10 yr immunotherapy collabora on ini ally on CAR T and T‐
Juno Therapeu cs/ Cell Receptor technologies; inc CD19 and CD22 directed CAR Discovery Celgene T candidates Access to ADC technology and Condi onally Ac ve Biologic Discovery BioAtla/ Pfizer (CAB) pla orm Intrexon/ Merck KGaA Access to CAR T cancer therapy products and RheoSwitch technology Hanmi/ Janssen Oxyntomodulin based therapies including HM12525A 2 915 105 Voyager Therapeu cs/ Sanofi Mul ple AAV programmes, including Parkinson’s disease, Friedreich’s ataxia, Hun ngton’s disease, other CNS disorders 1 845 100 Ionis (ex Isis) Pharma/ Janssen An sense drugs to treat autoimmune disorders of GI tract ‐ local and oral therapies (3 programmes) Discovery 835 35 © Medius Associates Ltd www.medius-associates.com
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Annual Review 2015
Table 4 : Hanmi Pharmaceu cals Major Deals During 2015 Partner
Deal type
Product /technology
Status
Sanofi Licence with option 3 diabetes products 1) efpeglenatide, long‐acting to co‐commercialise GLP‐1 agonist 2) weekly insulin 3) fixed‐dosed in Korea and China weekly GLP‐1‐RA/insulin combo worldwide Janssen Licence Boehringer Ingelheim Eli Lilly Headline Upfront
$m
$m
2 4,259 437 Oxyntomodulin‐based therapies including HM12525A ex Korea, China 2 915 105 Licence and collaboration HM61713 a 3rd generation EGFR targeting agent in NSCLC ex S Korea, China, HK 2 730 50 Licence and collaboration BTK inhibitor SLE excluding HK, Korea, Taiwan 1 690 50 Deal Trends: Overview and Analysis
During the year we have reviewed over 350 deals and assessed trends in terms of development stage, therapeu c areas and type of transac on. Our analysis focuses on deals based on proprietary assets. Nearly half (42%) of all the deals we reviewed covered assets that were at the non‐clinical stage of development (discovery, pla orms for drug discovery, delivery and related technologies, and preclinical). Deals for clinical stage assets (phase 1 through to phase 3 and including pre‐registra on stage) represented 32% of the transac ons and 22% were for approved and marketed products. Overall there was a larger propor on of early stage non‐clinical deals than we observed during 2014. Of clinical stage transac ons, phase 2 remains the most popular for deal making, which provides the licensee or acquirer with sufficient, early clinical de‐risking of the project to make the commitment financially as well as strategically a rac ve. The top therapeu c areas by stage of development are illustrated in Figure 1. It is no surprise that immuno‐oncology con nues to be the busiest area for discovery stage deals. Oncology is also a major focus for discovery and preclinical stage transac ons. The majority of pla orm deals during the year were centred on an body‐based therapeu cs, as well as novel drug delivery technologies and several of these were also targeted at oncology indica ons. Figure 1: Deals by development stages showing top therapeu c areas mul ple oncology CNS an ‐infec ves/
vaccines oncology immuno‐oncology opthalmology immuno‐oncology oncology mul ple/non‐disclosed cardiomet/diabetes approved/
marketed discovery/
pla orms an body‐related drug delivery phase 3/pre‐
reg preclinical phase 2 CNS rare oncology cardiomet/diabetes © Medius Associates Ltd phase 1 and 1/2 oncology immuno‐oncology an ‐infec ves immuno‐oncology oncology CNS www.medius-associates.com
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The immuno‐oncology / oncology theme con nued through to clinical deals and beyond to transac ons involving approved and marketed products. However, as we noted last year, there was also significant ac vity in therapeu c areas such as CNS, rare diseases and an ‐infec ves including vaccines. Many of the corporate acquisi ons announced during 2015 involved companies with por olios containing mul ple products in many different therapeu c areas. It is therefore not unexpected to observe that 18% of all deals done at the approved/marketed stage cover mul ple therapeu c areas. Immuno‐oncology con nues to be of huge interest
Given the huge interest in immuno‐oncology based on early signals of success, it is not unexpected to see so many deals being done in this area. Amongst deals at the non‐clinical development stage, approximately 28% of those we reviewed are in immuno‐oncology, compared to around 18% in what we might call more “classical” oncology. In clinical stage deals, approximately 17% were in immuno‐oncology and 15% in oncology; the majority of these immuno‐oncology transac ons were at phase 1 reflec ng the recent emergence of this field. Review of the therapeu c en es covered in immuno‐oncology transac ons reveals that an body therapeu cs are the basis for the majority of these deals, with cell‐based therapeu cs (e.g. chimeric an gen receptor (CAR) T‐cell therapies) being the next most popular approach. Small molecules, cancer vaccines and nucleic acid‐based en es also feature in immuno‐oncology deals. In addi on to the deals referred to above, there is a mul tude of collabora ons between oncology‐focused companies to evaluate different combina ons of their developmental and approved immuno‐oncology and oncology therapeu cs in early clinical studies. Companies including Merck & Co and BMS (with their an ‐PD‐1 an bodies, Keytruda and Opdivo, respec vely), Lilly and AstraZeneca have been par cularly ac ve in establishing clinical collabora ons with their poten al compe tors, as well as with biotechs, to assess the best combina on of therapeu cs for a par cular cancer type. As these collabora ons do not divulge financial informa on we have not included them in our broader analysis of deal ac vity in this area. Gene edi ng
As a "wunderkind" that has recently stormed the scene, the CRISPR (clustered regularly interspaced short palindromic repeat)/Cas‐9 technology has emerged as a hot genome edi ng technique and is now the subject of deals for the discovery of new therapeu cs. In what can be likened as "molecular scissors", CRISPR/Cas‐9 is based on a system from the bacterium Streptococcus pyogenes. CRISPR is an RNA‐guided gene edi ng technique that u lises Cas‐9, a bacterially derived protein, and a synthe c guide RNA to introduce a double strand break in the DNA at a specific site within the genome. This can be used for gene edi ng, i.e. adding, disrup ng or changing the sequence of specific genes. As such CRISPR/Cas‐9 offers an enabling approach to correct defec ve genes with the poten al for cura ve therapies. Several start‐up biotechs, including CRISPR Therapeu cs, Editas Medicine, Intellia Therapeu cs and Caribou Biosciences have certain rights to CRISPR/Cas‐9 IP and these companies are becoming ac ve deal makers. For example, CRISPR Therapeu cs signed a mul ‐programme collabora on with Vertex in October to u lise CRISPR/ Cas‐9 to discover and develop therapeu cs in a number of diseases with defined gene c targets, including cys c fibrosis and sickle cell disease. Near the close of the year CRISPR Therapeu cs joined with Bayer to create a joint venture (JV) to discover and develop new therapeu cs targeted at blood disorders, blindness and congenital heart disease. In a similar vein, Editas signed a deal with Juno Therapeu cs in May for 3 research programmes to use CRISP/Cas‐9 in conjunc on with Juno’s CAR T‐cell and T‐cell receptor (TCR) technologies to develop new cancer therapeu cs. With a very compe ve IP environment, and patents owned by a number of ins tu ons and associated spin‐out companies, we will be watching closely in 2016 to see how this field plays out. © Medius Associates Ltd www.medius-associates.com
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Type of transac on
Whilst deals are being done at every development stage, it is apparent that the status of the asset influences the type of transac on, with risk management being the key objec ve for the licensee or acquirer. As can be seen in Figure 2, of the approximately 350 transac ons we reviewed throughout 2015, around 64% of these were for deals based on licensing arrangements, collabora ons and various op ons to provide flexibility in the deal structure and with most of the considera on linked to achieving specified objec ves downstream. Overall approximately a third (33%) of the total deals were acquisi ons of companies, business units or assets. There were also several transac ons during the year in which new vehicles, e.g. joint ventures and spin‐outs, were set up to progress the development and commercialisa on of specific programmes. When assessing the type of transac on by development stage, Figure 2 illustrates that earlier stage deals are almost en rely, but not completely, based on licensing style arrangements with an emphasis on managing risk. As assets are de‐risked the propor on of acquisi ons increases, although as Figure 2 demonstrates this is not a completely linear rela onship. By the me assets reach the approved and marketed stage, the majority of deals (around 78%) are acquisi ons. Figure 2: Type of deal by development stage all deals approved/marketed phase 3/pre‐reg phase 2 phase 1 and 1/2 preclinical discovery/pla orm 0 licence/ collabora on © Medius Associates Ltd 50 100 150 200 acquisi on—company/ asset www.medius-associates.com
250 300 350 400 JV/ NewCo forma on/ other 12
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Annual Review 2015
Non‐clinical Deals
Discovery and pla orm deals
We reviewed some 104 deals involving discovery/ pla orm collabora ons during the year. The vast majority of these transac ons were targeted at the discovery of new therapeu c en es. There was also a range of deals focused on technologies to enhance an body‐derived therapeu cs, e.g. the genera on of an body‐drug conjugates (ADCs), as well as collabora ons around drug delivery and formula on technologies. In keeping with previous years, many of these deals followed the typical early stage collabora on style agreements, which contain mul ple elements in the structure to cater for risk in the development process. While the headline values for these transac ons can be eye watering because mul ple programmes are usually involved, it is important to note that as a general rule only the upfront payments are uncondi onal and that to achieve the headline value all programmes have to be successful. Some examples of discovery collabora ons are illustrated in Table 5. The headline values quoted in Table 5 are taken from the companies' press releases; some companies quote an overall value for the mul ple programmes, while others provide a figure based on a per programme basis. This divergence in repor ng deal financials makes it difficult to directly compare transac ons. Where the financials are reported on a per programme basis, or where this can be calculated, we have amalgamated the sum of the milestones for one programme, upfront and any other payments to es mate a headline value. In the deals we have reviewed, the milestones for early stage discovery/pla orm deals on a per programme basis typically ranged from around $50m to $525m. These included R&D, regulatory/clinical as well as commercial milestones. Many of these types of transac ons also include sales‐related milestones based on pre‐agreed product sales thresholds. As a general rule deals involving delivery or formula on technologies tended to have per programme milestones at the lower end of the range; deals covering the discovery of new therapeu c en es tended to have higher per programme milestones. In previous years early stage discovery deals had typical values per programme in the region of $97‐320m in 2013 and $138‐400m in 2014, so whilst the lower end of the range is fairly consistent, the higher end suggests some infla on. The upfront payments associated with these early stage transac ons also varied quite significantly. In some deals the upfront payments included cash as well as equity investments. The overall value of the upfront payments will most likely be influenced by the number of programmes covered. Upfront payments for mul ‐programme deals ranged from single digit $m figures up to the $150m paid by Celgene to Nurix for their strategic collabora on announced in September to discover novel small molecule therapeu cs in oncology, inflamma on and immunology, including immuno‐oncology. This collabora on is focused on Nurix's core exper se in the field of protein regula on by targe ng E2 conjuga ng enzymes and E3 ligases that control the Ubiqui n Proteasome System (UPS). UPS modulates protein homeostasis, a fundamental cellular process that controls protein levels. There are approximately 60 E2 enzymes and 1,000 different E3 ligases encoded by the human genome and a number of these ligases have been shown to play key roles in human diseases, par cularly in cancer. In addi on to the $150m upfront, Celgene made an undisclosed equity investment in Nurix for an op on to license future programmes, with the ability to extend the op on to license term for addi onal payments. Nurix will control, and is responsible for, all drug discovery and development ac vi es to the end of phase 1 clinical trials. The structure of this deal is a good example of typical mul ‐programme collabora ons. Celgene has an op on to license global development and commercialisa on rights to each programme in exchange for an op on fee and future development, regulatory, clinical and sales milestones. In the case of this deal, the op on fee and milestones are up to $405m per programme with ered single digit to low double digit royal es on global sales. © Medius Associates Ltd www.medius-associates.com
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Table 5 : Selected Early Stage Discovery/ Pla orm Collabora ons Licensor Acquired /
Licensee Acquirer
Ionis Pharma (formerly Isis)/ Janssen Halozyme/ Lilly Anokion/ Astellas Pharma Unum Therapeu cs/ Sea le Gene cs Kite Pharma/ Amgen CRISPR Therapeu cs/ Vertex Pieris Pharma/ Roche Heptares/ Teva Kyorin Pharma/ BMS Inhibrx/ Five Prime Therapeu cs Ablynx/ Merck & Co Almac Discovery/ Genentech Ablynx/ Novo Nordisk Arcturus Therapeu cs/ Ultragenyx Pharma Notes:
Product / Technology
An sense drugs to treat autoimmune disorders of GI tract ‐ local and oral therapies (3 programmes); op on to license candidates for development Up to 5 Lilly compounds with Halozyme's Enhanze pla orm to enable/ enhance subcutaneous delivery Forma on of Kanyos Bio based on Anokion's technology for induc on of an gen‐specific immune tolerance; focus on type 1 diabetes, coeliac disease; Astellas has op on to add 3rd indica on and acquire Kanyos An body‐coupled T‐cell receptor (ACTR) technology for 2 Sea le Gene cs an bodies; op on to expand to 3rd product; co‐develop and jointly fund programmes a er p1 with US co‐commercialisa on and 50/50 profit share unless either company opts out; SG retains exclusive rights ex US Collabora on to develop CAR T‐cell immunotherapies based on Kite's autologous cell therapy pla orm and Amgen's cancer targets; reciprocal milestones: Kite to receive $60m upfront + R&D costs through to IND filing plus up to $525m milestones + royal es per Amgen programme; Amgen to receive up to $525m milestones + royal es per Kite programme 4 yr collabora on using CRISPR/Cas‐9 gene edi ng technology to discover/develop up to 6 new treatments for gene c diseases such as CF and haemoglobinopathies, e.g. sickle cell disease; upfront $105m = $30m equity /$75m cash To discover and op mise An calin®‐based drug candidates against an undisclosed immuno‐oncology target Discovery of small molecule calcitonin gene‐related pep de (CGRP) antagonists for migraine FPR2 agonist programme for an ‐inflammatory therapeu cs; Kyorin has an op on for development and commercialisa on in Japan Therapeu c and diagnos c rights to glucocor coid‐induced tumor necrosis factor receptor (GITR) an body programme; op on to license mul ‐specific an bodies that bind to GITR and other targets; milestones per therapeu c product are $342.5m or up to $442.5m if FDA grants Breakthrough Therapy Designa on 4 yr expansion of immuno‐oncology collabora on for up to 12 addi onal Nanobody programmes (mono‐specific and mul ‐
specific); upfront payment comprises exclusivity fees and FTE payments 2 yr research programme to develop small molecule inhibitors of a ubiqui n specific protease (USP) target for oncology Mul ‐specific Nanobody drug candidates in undisclosed TA with op on to expand to 2nd programme; ini al 3 yr research term with $4.2m in research funding; exercise fee of $4.2m for 2nd programme mRNA therapeu cs to rare disease targets ‐ 2 targets ini ally; op on to add 8 further targets Headline $m
(Upfront)/
835* (35) *267 ms per prog 825* (25) *160 ms per prog 760* *253 ms per prog 645* (25 cash + 5 equity) *205 ms per prog 585* (60) *525 ms per prog (reciprocal) 525* (105) *420 ms per prog 416 (6.4) 410 (10) 405 (35) 352.5 ‐ 452.5 * (10) *342.5 ‐ 442.4 ms per prog 388.3* (14.3) *374 ms per prog 364 (14.5) 201.5* (5.3) 192* ms per prog 156* per target ms = milestones
Some of these deals also include reimbursement of R&D costs in addiƟon to the headline and upfront values quoted.
All deals are collaboraƟons/ licences and for global rights unless stated otherwise.
© Medius Associates Ltd www.medius-associates.com
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Celgene will have global rights to products coming out of the collabora on, with the excep on of certain collabora on products in which Nurix retains the rights for the US. These rights include the poten al for co‐
development and co‐commercialisa on of up to two programmes in the US on a 50:50 profit / loss split, with Celgene retaining ex‐US rights in exchange for payment of an op on fee, milestones and royal es on the ex‐US sales. Celgene also paid a whopping $1bn upfront in its 10 year global collabora on with Juno Therapeu cs announced in June for the development and commercialisa on of immunotherapies for cancer and autoimmune diseases. The collabora on will focus on CAR T and TCR technologies. As is o en seen in Celgene deals, this transac on has a series of co‐development, co‐commercialisa on and co‐promo on op ons in certain territories as well as cost and profit sharing arrangements. The $1bn upfront was split with $150m in cash and the remainder, approximately $846m, in shares; Celgene purchased ~9.1 million shares of Juno stock at $93.00 per share with the poten al to increase its stake over me. However whilst this may appear to be more like a phased acquisi on of Juno, Celgene's stake in Juno under this agreement will be to a maximum of 30% of Juno's common stock. Turning to royal es, this year we saw the typical references to ered, single and double digit royal es for the majority of deals reviewed. Interes ngly there were some references to actual numbers, for example, in the deal between Mul Cell Immunotherapeu cs and Oxis Biotech for 3 ADCs, Oxis will pay a 3% royalty on net sales. In the recent $100m deal between Idera Pharmaceu cals and GSK for the research and development of third genera on an sense therapeu cs for renal disease, Idera received $2.5m upfront and the royalty rate is quoted as being at varying rates up to 5% on annual net sales in excess of $500m. Preclinical stage deals
We reviewed nearly 60 deals for preclinical stage assets during the year. As observed in previous years, deals for preclinical stage assets and programmes usually include back‐up molecules as insurance in case the lead molecule fails. The majority of preclinical deals were licensing/ collabora on agreements (80%) with the remainder being acquisi ons of companies or assets, or spin‐outs of assets into new companies. There con nued to be crea ve deal structures at the preclinical stage to accommodate the s ll significant risk and echoing the themes for the early stage discovery/ pla orm transac ons. Two of these deals were par cularly interes ng; the deals between NGM Biopharmaceu cals and Merck & Co and between uniQure NV and BMS (captured in Table 6). In the 5 year collabora on with NGM for therapies targeted at diabetes, obesity and NASH, Merck & Co paid $94m upfront and purchased 15% of NGM for $106m at a 20% share price premium. In addi on Merck commi ed up to $250m to fund NGM’s ac vi es under the collabora on, with poten al addi onal funding. Prior to the ini a on of phase 3 trials for a Merck & Co licensed programme, NGM can choose whether to receive milestones and royal es or, in certain circumstances, to co‐fund development and enter into a cost/ revenue share of up to 50%. As o en seen in deals with US biotechs, NGM has a US co‐promo on op on for any co‐funded programmes. Also a typical feature is Merck's op on to extend the collabora on, in this case for 2 addi onal 2 year terms. © Medius Associates Ltd www.medius-associates.com
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Moving into the gene therapy field through its April deal with uniQure, BMS commi ed around $100m in the near term to a collabora on focused on uniQure's gene therapy candidate, AAV‐S100A1 (based on the adeno‐associated virus), and up to 9 other cardiovascular targets. AAV‐S100A1 is a gene therapy designed to be a one‐ me therapeu c for pa ents with advanced conges ve heart failure and in whom the normal S100A1 calcium‐binding protein is downregulated. Preclinical studies have demonstrated that S100A1 has in vivo beneficial effects on contrac le force, growth control of heart muscle cells and rhythm stability of the heart and is also able to adapt the heart’s energy supply to increased cardiac output. The ini al $100m paid by BMS includes $50m upfront, an ini al equity investment of around $32m in uniQure for 4.9% of the company and $15m for the selec on of 3 addi onal collabora on targets. BMS was also due to acquire an addi onal 5% ownership in uniQure before the end of 2015 at a 10% premium, and was also to be granted warrants to acquire up to an addi onal 10% equity based on addi onal targets introduced into the collabora on. In terms of other downstream payments, the deal included milestones of up to $254m for the lead S100A1 gene therapy and up to $217m for each other gene therapy product developed under the collabora on. Addi onal sales related milestones were not disclosed and royal es were ered from single to double digits. In terms of royal es and as observed for the discovery/ pla orm deals, li le informa on was forthcoming over and above the "digit references". However we note that one interes ng deal was that between Immunomic Therapeu cs and Astellas for DNA vaccine products for the treatment and preven on of allergic diseases based on Immunomic's LAMP‐vax pla orm. The licence covers ARA‐LAMP‐vax for peanut allergy as well as research stage programmes for food and environmental allergies. In an atypical structure, the upfront payment was $300m, there was no men on of milestones and then Astellas will pay 10% royal es based on net sales of products for allergic diseases. Meanwhile Immunomic retains the rights to the LAMP‐vax pla orm for other applica ons, including cancer immunotherapy. We iden fied some interes ng acquisi ons of preclinical stage companies and assets. These included the $1.25bn acquisi on of immuno‐oncology focused Flexus Biosciences by BMS for the biotech's lead, preclinical, small molecule IDO1 inhibitor F001287 and broad IDO/TDO discovery programme. As o en is the case for early stage company acquisi ons, this deal looked more like a licensing transac on with a large upfront ($800m) and with development milestones of $450m downstream. Celgene was also ac ve in acquiring at the preclinical stage with the decision to buy its collabora on partner since 2011, Quan cel Pharmaceu cals, for $100m upfront and up to $385m in con ngent payments based on R&D and regulatory milestones. © Medius Associates Ltd www.medius-associates.com
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Table 6 : Examples of Preclinical Stage Deals Headline $m
(Upfront)/
Financials
Licensor Acquired /
Licensee Acquirer
Product / Technology
Xoma Corpora on/ Novar s An ‐transforming growth factor‐beta (TGFb) an body programme including XOMA 089 plus other TGFb1 inhibitors for oncology indica ons Chromocell/ Astellas CC8464 and back‐up drug candidates, NaV1.7 ion channel blocker for neuropathic and other pain; for poten al addi onal indica ons Astellas has opt‐in rights and Chromocell has US co‐promo on rights 515 (15) Quan cel Pharma/ Celgene Company acquisi on follows 3.5 year collabora on focused on Quan cel's tumour analysis pla orm for new drug discovery in oncology 485 (100) NGM Biopharma/ Merck & Co 5 year collabora on on NP201 programme, comprising NGM386, NGM395 and other NP201 agonists for diabetes, obesity and NASH; Merck has op on to license programmes a er human POC trials; NGM may elect to co‐fund development and share costs/ revenues up to 50%; NGM has certain US co‐pro op ons uniQure NV/ BMS Gene therapy for cardiovascular disease targets including lead preclinical programme AAV‐S100A1 for restoring cardiac deficiency in conges ve heart failure and up to 9 other targets; near term payment of $100m (including $50m cash + $32m equity + $15m for selec on of 3 addi onal targets) and further equity investments 354* (50 cash + 32 equity) *milestones 254 for lead + 217/ prog for other targets enGene/ Janssen Collabora on on “Gene Pill” and enema non‐viral gene delivery pla orm; op on to license lead product candidate, EG
‐12, for gut‐localised expression of IL‐10 for IBD 339 (nd) Aveo Oncology/ Novar s AV‐380 (an ‐GDF15 an body) and related an bodies, including modified or deriva ve forms, for cachexia in cancer 326 (15) Immunomic Therapeu cs / Astellas Pharma LAMP‐vax products for treatment/ preven on of allergic, including ARA‐LAMP‐vax for peanut allergy + other research programmes for food or environmental allergies 300 10% royalty Checkpoint Therapeu cs/ TG Therapeu cs Collabora on to develop and commercialise an ‐PD‐L1 and an ‐GITR an bodies for haematological malignancies; Checkpoint retains rights to these an bodies in solid tumours Moderna Therapeu cs/ Merck & Co 3 year collabora on with op on to extend for up to 5 preclinical an viral vaccines/ passive immunity therapies based on mRNA against 4 undisclosed viruses Notes:
517 (37) 450 (94 cash: 106 equity) 165 (1) 100 (50 cash:50 equity) Some of these deals also include reimbursement of R&D costs in addiƟon to the headline and upfront values quoted.
All deals are collaboraƟons/ licences and for global rights unless stated otherwise.
© Medius Associates Ltd www.medius-associates.com
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Early Clinical Stage Deals
Phase 1 and phase 1/2 stage deals
We reviewed some 30 deals that were executed for phase 1 or phase 1/2 stage assets and a selec on of these is captured in Table 7. As seen for the non‐clinical deals some of the early clinical deals focus on a lead asset with other back‐up programmes at earlier stages of development. We note that there were several transac ons which represented the exercise of op ons to license or acquire assets at phase 1, again illustra ng crea ve deal structuring to accommodate risk. Celgene featured yet again in the deal making at phase 1: it exercised an op on to license Agios Pharmaceu cals’ AG
‐120, a small molecule an ‐cancer therapeu c, and also licensed an oral gut‐directed ATPase modulator for inflammatory bowel disease (IBD) and immuno‐oncology assets from Lycera Corpora on. The deal with Lycera included an op on to acquire the company. Other companies entering into more than one in‐licensing or acquisi on agreement at this development stage included Roche, Sanofi and Janssen/ J&J. Lilly was both in‐licensing and out‐licensing during the year while receiving certain grant back rights to the assets it out‐licensed. This is a feature Lilly has used in previous years, for example with its long term partner Transi on Therapeu cs. In the deal with Ignyta, Lilly out‐licensed its phase 1 stage oncology candidate taladegib, an oral small molecule hedgehog/ smoothened antagonist, as well as a topical formula on in preclinical development for superficial and nodular basal cell carcinoma. In terms of the financials for the deal, Ignyta paid $2m upfront in cash and issued to Lilly approximately $12.6m in shares. Lilly also made a $30m equity investment in Ignyta. A por on of the $38m development and sales milestones may be paid in Ignyta equity and in addi on Lilly will receive royal es. Lilly's grant back rights cover taladegib‐containing products in combina on with certain Lilly compounds, for which Ignyta will receive net sales royal es. Sanofi/ Genzyme entered the neuroscience gene therapy field during the year through its mul ‐programme collabora on with Voyager Therapeu cs paying $100m upfront including $65m cash, $30m equity and addi onal in‐
kind contribu ons. Focused on AAV‐based gene therapy technology, Genzyme's rights are on a per programme basis with op ons to license following comple on of ini al POC studies featuring in the deal structure. However, Genzyme does not get global rights to the programmes; Voyager retains all US rights to its lead product programmes in Parkinson’s disease and Friedreich’s ataxia and will split US profits with Genzyme for the Hun ngton’s disease programme. In the transac ons involving a company or asset acquisi on, or an op on to acquire, there con nued to be con ngent considera on based on downstream milestone events. For example, in May Boehringer Ingelheim exercised its op on to acquire Pharmaxis’ oral an ‐inflammatory drug candidate PXS4728A for NASH and associated IP rights. Pharmaxis received $30m upfront and will receive up to $60m milestones ed to the start of phase 2 and phase 3 trials, up to $152m in regulatory milestones upon MA filings and further milestones on approval of regulatory and pricing approvals in the US, EU, and China or Japan for the first indica on. Milestones are also payable for a second indica on. In addi on there are earn‐out payments, i.e. royal es on sales of PXS4728A programme products plus sales‐based milestones. As noted earlier the interest in CAR T‐cell therapies in immuno‐oncology con nues apace. We have covered 2 deals at phase 1 stage in Table 7. Servier exercised its op on to license global rights to UCART19, an allogeneic CAR T‐cell immunotherapy for chronic lymphocy c leukaemia (CLL) and acute lymphoblas c leukaemia (ALL) in development at Cellec s. In parallel Servier entered a deal with Pfizer to co‐develop and co‐commercialise UCART19, with Pfizer having rights to sell the product in the US and Servier responsible for marke ng elsewhere. © Medius Associates Ltd www.medius-associates.com
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The other CAR T‐cell deal in Table 7 is the acquisi on of Celdara's immuno‐oncology business unit, OnCyte, by Cardio3 BioSciences. OnCyte's lead product is an autologous CAR T‐cell drug candidate, CM‐CS1, which was due to start phase 1 studies in haematological malignancies. Following the con ngent payment theme, Celdara was due to receive earn‐out milestones as well as royal es on sales. Celdara and Cardio3 Bioscience disclosed that the royal es would range from 5 to 8%. This might be lower than many of the other deals we reviewed at phase 1 stage, which referred to royalty payments in the range of high single digits to double digits. Table 7 : Examples of Phase 1 and Phase 1/2 Stage Deals Licensor Acquired /
Licensee Acquirer Voyager Therapeu cs/ Sanofi Inovio/ AstraZeneca MedImmune Alligator Biosciences/ Janssen Hanmi Pharmaceu cal/ Lilly Pharmaxis/ Boehringer Ingelheim Cellec s/ Servier OnCyte (Celdara business unit)/ Cardio3 BioSciences Agios Pharmaceu cals/ Celgene Canbex/ Ipsen Lilly/ Ignyta Notes:
Product / Technology Collabora on/ op ons to license for mul ple AAV‐based gene therapy programmes, including Parkinson’s disease, Friedreich’s ataxia and Hun ngton’s disease, and other CNS disorders; territorial rights dependent on programme Licence for INO‐3112, DNA‐based immunotherapy targe ng cancers (e.g. cervical and head and neck cancers) caused by HPV types 16 and 18; including up to 2 addi onal DNA‐based cancer vaccines Licence to ADC 1013, agonis c CD40 mAb for oncology indica ons Licence for oral Bruton's tyrosine kinase (BTK) inhibitor, HM71224, for autoimmune and other diseases (p2 ready) (global excluding China, Hong Kong, Taiwan and Korea) Op on exercise to acquire asset PXS4728A, oral small molecule inhibitor of vascular adhesion protein‐1 for NASH Exercise of op on to license UCART19, allogeneic CAR‐T immunotherapy for CLL and ALL (entering p1) Acquisi on business unit; CAR T cell programmes including lead autologous product CM‐CS1 (IND stage); $50m milestones for CM‐CS1 + $21m per product for further products; up to $80m in sales milestones when net sales exceed $1bn Op on exercise to license AG‐120, oral, potent inhibitor of mutant IDH1 protein for oncology indica ons under 2010 collabora on; Agios retains US rights and receives royal es on ex‐US net sales and up to $120m in payments; Celgene receives royal es on US net sales Op on to acquire company ‐ lead product VSN16R for trea ng spas city in MS; op on exercise at end of POC p2a study, a total of up to $103m including acquisi on payment + clin/ reg milestones + royal es on sales of VSN16R Licence to taladegib oral, small molecule hedgehog/ smoothened antagonist for oncology indica ons; Lilly makes $30m equity investment and has rights to taladegib‐containing products in combina on with certain Lilly compounds Headline $m
(Upfront)/
Financials 845 (100) 727.5 (27.5) 700 (nd) 690 (50) 454* (30) *for 2 indica ons 338.2 (38.2) 161 (6 cash + 4 equity) royal es 5 ‐ 8%. 120 (cost share) 110 (6.8) 53 (2 cash + ~13 equity) Some of these deals also include reimbursement of R&D costs in addiƟon to the headline and upfront values quoted.
All deals are for global rights unless stated otherwise.
© Medius Associates Ltd www.medius-associates.com
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Mid Stage Deals
Phase 2 stage deals
Phase 2 was the most popular clinical stage for deals in 2015, con nuing the theme from 2014. We reviewed nearly 50 transac ons at this stage represen ng just over 40% of clinical stage deals; around 60% were licensing arrangements and the remainder were acquisi ons. A selec on of phase 2 deals is summarised in Table 8. By the me assets reach phase 2 and later stages, it is more common to see rights carved up on a regional basis. This is exemplified in Table 8 by several deals, such as the 2 Mitsubishi Tanabe transac ons which cover Japan and other Asian countries. In its licence with Regeneron for fasinumab, a monoclonal an body against nerve growth factor (NGF) for musculoskeletal pain, there is a typical structure around the upfront and R&D milestones. In addi on Regeneron will share a significant por on of poten al profits through an arrangement where it supplies product at a range of purchase prices depending on net sales. Regeneron is also eligible for addi onal one‐ me purchase price adjustment payments of up to $100m if specified annual net sales are achieved. Con nuing the cell therapy theme, and in addi on to the Athersys‐Chugai Pharmaceu cal licence for Mul Stem cell therapy for ischaemic stroke and Astellas Pharma's acquisi on of Ocata Therapeu cs and its regenera ve medicine‐
based ophthalmology por olio, there were 3 other phase 2 cell therapeu cs deals. These included the Tigenix acquisi on of cardiology‐focused cell therapy company Coretherapix and its lead programme AlloCSC‐01, an allogeneic cardiac stem cell product for acute myocardial infarc on. The deal headline was approximately $320m with $7m upfront in cash and equity with the majority of the considera on based on downstream milestones. We commented earlier on some of the ac vi es of large pharma companies in licensing or "loaning out" assets that otherwise would sit on the shelf. In addi on to Lilly, Merck & Co and Novar s also licensed out phase 2 assets to partners during the year. In July Merck & Co granted a global licence to Allergan for two small molecule oral calcitonin gene‐related pep de (CGRP) receptor antagonists, MK‐1602 and MK‐8031, in phase 2 and phase 1 development respec vely, for the treatment and preven on of migraine. Paying $125m upfront and $125m in April 2016, Allergan will also pay Merck development and commercial milestones and ered double digit royal es. Allergan will be fully responsible for the further development of the CGRP assets, including manufacturing and commercialisa on. Novar s took a slightly different approach and entered into a transac on with newly founded company Mereo BioPharma, in which it swapped 3 phase 2 clinical assets for equity in Mereo. The 3 assets are BPS‐804 for bri le bone syndrome, BCT‐197 for acute exacerba ons in COPD, and BGS‐649 for hypogonadotrophic hypogonadism in obese men. Based on an ini al $119m fund raising, Mereo has formed a partnership with the ICON to progress development of its product por olio. In addi on to its equity stake, Novar s will take a share of the milestones and royal es that Mereo receives related to the 3 assets. Reviewing disclosed informa on on royalty rates illustrates that as drug candidates are progressing towards late stage clinical development, the vehicles for compensa ng the licensor when products are commercialised are perhaps more complex. For example royal es payable are linked to a transfer price or gross margins or based on a profit share. As can be an cipated, royalty rates for phase 2 stage assets are generally higher than seen for earlier stage deals. Several transac ons refer to royalty rates in or up to the 20% range. In the recent Galapagos partnership with Gilead for filgo nib, a JAK1‐selec ve inhibitor for inflammatory disease indica ons, Galapagos will co‐fund 20% of global phase 3 development ac vi es. In terms of the financials, Galapagos received $725m upfront ($300m in licence fees and $425m as equity investment) and the milestones are up to $1.35bn. On product commercialisa on royal es will be ered and start at 20%; in co‐promo on territories in Europe, the profits will be shared. © Medius Associates Ltd www.medius-associates.com
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Table 8: Examples of Phase 2 Stage Deals Headline $m
(Upfront)/
Financials Licensor Acquired /
Licensee Acquirer Product / Technology Achillion Pharmaceu cals/ J&J Licence and collabora on for one or more of Achillion's lead hepa s C virus (HCV) assets including ACH‐3102, ACH‐3422 and sovaprevir; J&J also makes $225m equity investment 1,110 (nd) AM Pharma/ Pfizer Acquisi on of minority interest and op on to acquire remaining equity; lead product is recombinant human Alkaline Phosphatase for inflammatory diseases including Acute Kidney Injury (AKI) related to sepsis; op on exercisable upon p2 comple on 600 (87.5) Trophos/ Roche Acquisi on of company ‐ lead product olesoxime, orphan drug for spinal muscular atrophy, plus TRO 40303 in p1 for cardiac injury and preclinical assets; con ngent payments up to $406m based on achievement of certain predetermined milestones 545 (139) Phenex Pharma/ Gilead Sciences Acquisi on of Farnesoid X Receptor (FXR) programme for liver diseases including NASH 470 Ocata Therapeu cs/ Astellas Pharma Acquisi on of company; regenera ve medicine with por olio in ophthalmology including products for Stargardt’s macular degenera on, dry AMD and myopic macular degenera on 379 Akebia Therapeu cs/ Mitsubishi Tanabe Pharma Licence for vadadustat, oral therapy for treatment of anaemia related to chronic kidney disease (CKD) in Japan and certain other Asian countries 350 (40) Regeneron/ Mitsubishi Tanabe Pharma Licence to fasinumab, nerve growth factor (NGF) mAb for musculoskeletal pain in Japan, Korea + 9 other Asian countries, ex China; Regeneron has a profit share arrangement 325 (55) Theravance/ Mylan Co‐development of TD‐4208, once‐daily nebulised long‐ac ng muscarinic antagonist (LAMA) for COPD; Theravance has US co‐pro op on 265 (15 cash + 30 equity) Merck & Co/ Allergan Licence to oral calcitonin gene‐related pep de (CGRP) receptor antagonists for migraine SuppreMol/ Baxter Interna onal Athersys/ Chugai Pharmaceu cal Company acquisi on ‐ lead product SM101, an immuno‐regulatory treatment for ITP and SLE Licence/ collabora on for Mul Stem cell therapy for ischaemic stroke in Japan Ionis (formerly Isis) Pharmaceu cals / Bayer Licence to ISIS‐FXIRx ‐ an sense drug for preven on of clo ng disorders targe ng Factor XI; $155m in upfront and near‐term payments plus addi onal undisclosed milestones 155+ (100) Lilly/ Transi on Therapeu cs Licence to TT701 ‐ selec ve androgen receptor modulator for androgen deficiency 101 (1) Oramed Pharma/ Hefei Tianhui Incuba on of Technologies Company Licence for ORMD‐0801, oral insulin capsule for diabetes in Greater China; Oramed had already received $0.5m under a Le er of Intent covering a 60 day nego a on period; financials include $12m equity investment Notes:
250 upfront + milestones (nd) 225 205 (10) 50 (3) up to 10% royalty Some of these deals also include reimbursement of R&D costs in addiƟon to the headline and upfront values quoted.
All deals are for global rights unless stated otherwise.
© Medius Associates Ltd www.medius-associates.com
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Late Stage Deals
Phase 3
By comparison with the number of phase 3 deals closed during 2014 (i.e. 15), 2015 has seen an increase in number to 27 transac ons (including one phase 3 ready deal). Of these, some 21 were for small molecules, indica ng how important these remain despite the growing importance of biologicals. The table below denotes selected deals by headline value excluding the higher value company acquisi ons, for example Receptos‐Celgene ($7.2bn); Acerta‐AstraZeneca ($4bn) and Auspex‐Teva ($4.3bn). Reflec ng the comments made previously, it is not surprise that oncology was the most frequent focus of phase 3 deals, featuring in 9 deals in total. Again, perhaps contrary to popular percep on, no less than 7 of the oncology deals were for small molecules. Ophthalmology was the only other notable therapeu c area, with a total of 4 deals in this field. The majority of all the deals (14) included global rights. Table 9: Selected Phase 3 Licensing Deals with Headline Values >$100m Licensor
Licensee
Details
Lexicon Sanofi Collabora on, licence Sotagliflozin, p3 oral dual inhibitor of sodium‐glucose cotransporters 1 and 2 (SGLT‐1 and SGLT‐2). Op on to co‐promote in US 1,700 GSK Novartis Acquisition of asset Arzerra 1,034 Bavarian Nordic BMS Option to license and commercialise Prostvac 975 BioMarin Medivation Acquisition asset purchase agreement talazoparib (BMN 673) oral poly ADP ribose polymerase (PARP) inhibitor 570 Array BioPharma Pierre Fabre Licence collaboration Binimetinib, a MEK inhibitor, and encorafenib, a BRAF inhibitor 455 AstraZeneca Celgene Exclusive collaboration MEDI4736 immune checkpoint inhibitor against programmed cell death ligand 1 (PD‐L1) 450 Resverlogix Corp Shenzhen Hepalink Licence and equity investment RVX 208 a selective BET bromodomain inhibitor (turns disease causing genes off) p3 ready ‐ cardiovascular disease patients 427 Relypsa Vifor Licence to commercialise Patiromer (oral suspension) Fresenius potassium binder being developed for the treatment of Medical Care hyperkalemia Syndax Kyowa Hakko Kirin © Medius Associates Ltd Licence SNDX275, Entinostat, Class I selective HDAC inhibitor being tested in combination with hormone therapy for advanced breast cancer and immune therapy combinations in solid tumours www.medius-associates.com
Headline $m
165 100 22
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The largest collabora ve deal was between Sanofi’s and Lexicon Pharmaceu cals, with a headline valua on of $1.7bn. In this deal, the companies will carry out co‐development of the compound. Sanofi will gain rights outside the USA to the an diabe c sotalglifozin whilst Lexicon will retain co‐promo on rights in the US. The most ac ve companies acquiring rights at phase 3 were AstraZeneca, Celgene and Shire, each with 2 phase 3 deals. Pre‐registra on deals
We note that it is less usual for licences to be closed for late stage assets and generally if for global rights these come with a he y price tag. As a contrast, in its deal with Teva, Eagle secured a $30m upfront with $90m in milestones. Teva waived the orphan exclusivi es for EP 3102 in order to reach the market more quickly; the par es also se led the patent infringement ac on at the same me. More usual is that the deal is for regional or na onal rights as in the Aveo‐EUSA deal for vozanib in advanced renal cell carcinoma. The upfront was $2.5m so very back loaded but as a sub‐licence, a percentage of the milestones and royal es are due back to Kyowa Hakko Kirin. The rights extend to Europe and other territories outside North America. For regional rights again, Telesta closed 2 late stage deals covering MCNA (Mycobacterium phlei cell wall‐nucleic acid complex) for non‐muscle invasive bladder cancer. The first was in July for an exclusive licence supply and distribu on agreement with BL&H in South Korea. Telesta received $2m upfront with a large share of revenue. In addi on BL&H made an equity investment of $200k. The second deal was in October with Ipsen paying $10m upfront for rights to MCNA in Europe and other non US markets. Table 10: Pre‐registra on Deals Headline
$m
Licensor
Licensee
Details
AstraZeneca Valeant Acquisi on of brodalumab (IL‐17 receptor mAb)for psoriasis and psoria c arthri s, ready for submission to regulators in EU and US 445 Aveo EUSA Licence and collabora on for vozanib, oral, once‐daily, VEGF tyrosine kinase inhibitor (TKI) 397 Telesta Therapeu cs Ipsen Licence to MCNA (Mycobacterium phlei cell wall‐nucleic acid complex) 137 Eagle Pharma Teva Licence to EP‐3102, Eagle’s bendamus ne hydrochloride (HCl) rapid infusion product for the treatment of chronic lymphocy c leukaemia (CLL) and indolent B‐cell non‐Hodgkin lymphoma (NHL) 120 Asklepion Pharmas Retrophin Acquisi on of cholic acid for the treatment of bile acid synthesis defects worldwide 78 Telesta Therapeu cs BL&H Co Licence, supply and distribu on of MCNA (Mycobacterium phlei cell wall‐nucleic acid complex) in Korea 2.2 © Medius Associates Ltd www.medius-associates.com
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Pre‐approval deals
Deploying its regional strength Servier closed an exclusive licence agreement with Taiho for the development and commercialisa on of TAS‐102 (trifluridine and piracil hydrochloride) for colorectal cancer in Europe. Taiho retains the right to the US, Canada, Mexico as well as Japan/Asia and will also manufacture and supply the product. Taiho receives a total of $130m upfront with cost sharing for future global development on an equal basis. Ever crea ve in its deal designs Celgene elected to invest $45m in Mesoblast at a premium price (A$3.82 per share for 15.3 million shares). In addi on Celgene secured the right‐of‐first‐refusal on a group of stem cell programmes with varied applica ons gra ‐versus‐host disease (GVHD), certain oncologic diseases, inflammatory bowel diseases and organ transplant rejec on. Table 11: Selected Deals for Approved Products Headline
$m
Licensor
Licensee
Details
Kythera Biopharmaceu cals Allergan Acquisi on of company por olio of Rx aesthe c medicine products ‐ lead product KYBELLA™ (deoxycholic acid) injec on for sub‐mental liposis (double chin) 2,100 Valeant Company acquisi on includes Addyi (flibanserin) 1,000 Raptor Pharmaceu cal Acquisi on of Quinsair ‐ inhaled levofloxacin 452.6 Taiho Pharmaceu cal Servier Licence to TAS‐102, an oral combina on an cancer drug of trifluridine (FTD) and piracil hydrochloride (TPI) 130 Mesoblast Celgene Minority investment and op on to license stem‐cell products for condi ons including inflammatory bowel disease and certain oncological indica ons 45 Acura Pharmaceu cals Egalet Licence, collabora on Oxecta ‐ immediate release oxycodone hydrochloride tablets 20 The Medicines SymBio Company Pharmaceu cals Collabora on IONSYS (fentanyl iontophore c transdermal system) in Japan 10 OBI Pharma Licence to Dificid® (fidaxomicin) in Taiwan 3 Sprout Pharmaceu cal Tripex Pharmaceu cals Merck & Co With a headline value of $20m the deal between Egalet and Accura for oxycodone includes an upfront of $5m with an addi onal $2.5m due with a longstop date of 1st January 2016. There is an addi onal $12.5m milestone due when annual global net sales reach $150m in a calendar year. In October Merck & Co acquired the rights to commercialise Dificid (fidaxomicin) for Clostridium Difficile‐Associated Diarrhoea (CDAD) in Taiwan from OBI Pharma for $3m upfront. Dificid was developed by Op mer Pharmaceu cals, which was acquired by Cubist in July 2013; Cubist in turn was acquired by Merck & Co in December 2014 for $8.4bn. © Medius Associates Ltd www.medius-associates.com
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Manufacturing
Manufacturing: expansion in spite of problems
The pharmaceu cal manufacturing sector has had its share of ups and downs in 2015. The restric ons on supply from some Indian manufacturers has con nued, some Big Pharma companies have had to recall products and there con nues to be consolida on in the sector as Big Pharma closes or sells factories. On a more posi ve note some Big Pharma companies and CMOs are making substan al investments in manufacturing either internally or by company acquisi ons. India – ongoing compliance issues but investment by domes c and foreign
companies con nues
In India, in December the FDA banned all products from Pan Pharma and during the year Sun Pharma, Wockhardt and Dr Reddys were also affected by FDA restric ons. Similarly Mylan received a FDA warning le er rela ng to 3 Indian factories acquired with the Agila sterile injectables unit from Strides Arcolab for $1.75bn in 2013. Mylan has made a claim for compensa on from Strides for the cost of improvements needed to upgrade the factories. With the number of cases of compliance issues, it would hardly be surprising if investment in India by foreign companies would be halted, but this is not the case. In October, Recipharm announced the acquisi on of a 74% share of the Indian sterile injectable CMO, Ni n Lifesciences, for $105m as part of its strategy to expand into emerging markets. In addi on, Indian manufacturing and generics companies con nue to expand both in India and overseas. For example, Sun Pharma, India’s largest pharmaceu cal manufacturer, is rumoured to be in talks to acquire the Indian company, Intas Pharmaceu cals which has 10 factories, for $2.3bn. In 2015 Sun completed the acquisi on of Ranbaxy including 4 factories from Daiichi Sankyo for $3.2bn. It also acquired, for an undisclosed sum, the opiate API business of GSK including 2 factories in Australia. Frequently the acquisi on of a company will include a range of products as well as a factory such as with Cipla’s and Lupin’s acquisi ons of US‐based generics companies Invagen and Gavis respec vely. These acquisi ons are part of the Indian companies’ expansion overseas. For example, Strides acquired the Australian business from Aspen including 140 generics products for $300m. So while problems remain in India, the outlook for further expansion remains posi ve. Table 12: Generics Acquisi ons Target Acquirer Product / Technology of target $m Gavis (US) Lupin (IN) Acquisi on: US generics company 880 Invagen (US) Cipla (IN) Acquisi on: 2 US generics companies 550 Aspen (AU) Strides Arcolab (IN) Acquisi on assets: Australian generics, pipeline Ni n (IN) Recipharm (SE) Acquisi on majority share: Indian factory 300 105 Manufacturing ra onalisa on and consolida on, mostly by Big Pharma, con nues
Most of the manufacturing related deals reported in the press are company or asset acquisi ons. O en, these arise from ra onalisa on of manufacturing facili es either following a merger or as part of a strategy to downsize or out source. According to Reuters, Pfizer has 65 plants and will gain a further 40 from the merger with Allergan. Almost certainly Pfizer will shut down or sell plants as it did following the merger with Wyeth when around 8 plants and 30% of the manufacturing jobs were eliminated. © Medius Associates Ltd www.medius-associates.com
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The price paid for such factories to a large extent depends on the value of long term supply agreements and the sales and gross margin of products, if any, included in the deal. For example Meda divested Euromed, its Spanish natural ac ve substance (NAS) manufacturer, acquired as part of the Ro apharm merger, to Riverside a private equity company. The price of $87m included sales of $42m with an EBITDA of 20%. Similarly Alkermes sold a US factory plus global rights to Meloxicam to Recro Pharma for $50m upfront plus $120m in milestones plus low double digit royal es. The Perrigo acquisi on of Patheon’s Mexico business including a so gel factory is another example of divestment of a factory plus products. Another approach by Big Pharma companies is to sell a factory where it has its own products made and as part of the deal to agree a long term supply agreement from the acquirer. This is what Novar s did with the sale to Recipharm of its Alcon factory in France. Another strategic approach was Sucampo’s acquisi on of the Japanese company R‐Tech Ueno to ensure control of manufacture of the company’s marketed product, to reduce costs and also to acquire a product development pipeline. Table 13: Manufacturing Acquisi ons Target Acquirer Product / Technology of target $m Cellular Dynamics Fujifilm Acquisi on: US company producing human cells 307 BASF (DE) Siegfried (CH) 3 API plants Germany, Switzerland, France 306 R‐Tech Ueno (JP) Sucampo (US) Acquisi on: Factory and pipeline 278 Alkermes (US factory) Recro Pharma (US) Acquisi on assets: US factory plus product 170 WuXi (CH) AstraZeneca (UK) Acquisi on assets: biologics manufacture 100 Meda (ES factory) Riverside Co (US) Acquisi on: Euromed (ES) NAS manufacturer 87 Patheon (MX) Perrigo (IE) Acquisi on assets: So gel factory, MX business 34 Pfizer (Thane IN) Vidhi R&D (IN) Acquisi on assets: Indian factory 27 Novar s (FR factory) Recipharm Acquisi on assets: Alcon factory + supply 20 Manufacture of biological products is an area where companies are seeking to establish a strategic presence. One approach is to source from a biologic CMO and the other is to acquire or set up a dedicated facility. Sanofi decided to follow the CMO approach announcing in January that it would establish an alliance with Boehringer Ingelheim whose cell culture opera ons will provide contract manufacturing capaci es to support the produc on of Sanofi’s biologics pipeline. The acquisi on approach was adopted by Fujifilm and AstraZeneca. Fujifilm purchased Cellular Dynamics and it was announced that AstraZeneca will acquire WuXi’s biologic manufacture. In September AstraZeneca had announced it was acquiring a biologics manufacturing facility from Amgen and is in the process of building a $285m dedicated fa‐
cility in Sweden. The facility in Sweden raises the point that manufacturing expansion is not only created by deals between companies. In addi on, there is significant investment in building new facili es by many companies such as AstraZeneca’s announcement to build a $125m facility in Algeria, Gilead’s $100m in Canada and Novo Nordisk’s $78m in Iran. Novo Nordisk has announced many manufacturing ini a ves this year and gets the prize for the best integrated pharma company’s expansion of manufacturing. Recipharm, as in 2014, con nues to expand rapidly and gets the prize for the best CMO deal maker. During 2016 we expect to see more ra onalisa on of manufacturing sites by Big Pharma and con nued acquisi on of factories (and products) by the top CMOs and generics based companies. © Medius Associates Ltd www.medius-associates.com
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Generics
Generics: “I know where I am going”
“I know where I am going” 1947 film by Powell and Pressburger about a girl who goes to Scotland to marry a wealthy old man but instead falls in love and marries a young naval officer, thus realising: “Money does not bring happiness” Last year’s Annual Deal Watch asked the ques on “Do the larger generics companies know where they are going? Are they having an iden ty crisis?” These ques ons arose from the fact that many of the generics companies like Teva, Actavis, Mylan and Stada were making deals in 2014 in speciality medicines and consumer health. In 2015 it seems that the companies fell into 2 groups, the stayers and leavers. The stayers were companies such as Teva that in spite of its aim “to significantly grow its specialty medicines business” decided to acquire more generics. In December, it announced a joint venture with Takeda to market generics in Japan. Teva will own 51% of the company. But the really big deal that suggests Teva will remain true to its roots was the announcement in July of the acquisi on of Allergan’s Actavis generics business for $40.5bn. This was an expensive acquisi on with a sales mul ple of 6 and an es mated EBITDA mul ple of 15 before synergies. To meet an ‐trust concerns Teva will have to dispose of a substan al volume of products so this may benefit one of the other generics stayers. It would be temp ng to say that Mylan is a stayer but its deals in 2015 were about Rx speciality and OTC brands such as Entocort and women’s health. The a empt to acquire Perrigo, an OTC company, further suggests that Mylan does not yet know where it is going. On the other hand Allergan definitely knows where it is going, at least, it did in November 2015. In January it seems it was not so sure about depar ng from generics because it bought the UK‐based generics company, Auden Mackenzie, for $458m. However once Actavis changed its name to Allergan in February the wri ng was on the wall for the generics business and in July it was announced Actavis generics would be sold to Teva for $40.5bn. Four months later, Allergan was snapped up by Pfizer for an eye watering $160bn to enable Pfizer to achieve its objec ve to reduce the company’s tax burden by a tax inversion. The US Treasury may yet defeat Pfizer’s ambi on. Big Pharma is con nuing its exit from generics where the business is sub‐cri cal and/or non‐core. In the US there were 2 Big Pharma divestments: Boehringer Ingelheim sold Roxane to Hikma for $2.78bn and UCB sold its Kremers Urban business to Lanne for $1.23bn plus con ngent payments. There were 2 exits by private equity players, TPG in the US selling Par to Endo for $8.05bn and Cinven in the UK selling AMCo to the Canadian generics company, Concordia, for $3.55bn. For Hikma and Concordia the acquisi ons helped expand their interna onal coverage. In reading the press releases it is interes ng to note how some acquirers are reluctant to disclose the annual sales of the target company in the press release. Perhaps they are worried that the price/sales mul ple may appear unfavourable. For example Concordia paid a sales mul ple 6.6 whereas Endo did not men on the current level of sales in the press release however it was men oned in the SEC document where Par sales are quoted as $1.3bn giving a ra o of 6.2. Although this is a very high ra o for a generics business (Cipla and Lanne paid around 3x), it is less than the 6.6x paid by Concordia for AMCo and 8.3x for Covis assets. © Medius Associates Ltd www.medius-associates.com
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So who are the generics stayers? Well it would seem the generics companies in the west such as Teva and Sandoz will remain plus smaller specialised generics companies such as Hikma and Concordia but it is likely that generics companies from India will be the new global major generics players; companies such as Lupin and Cipla who have made acquisi ons in the US in 2015 plus the other large Indian generics companies. All of these companies appear to know where they are going. In 2015 we predicted “it would not be a surprise to see a divestment or spin‐off of a generics business from a major player” which is what happened with Actavis. During 2016 Sanofi is expected to sell its generics business. This is part of the strategic roadmap announced in early November which included the sale of the animal health business (see consumer health sec on below). We also expect further consolida on in the generics sector with the remaining non‐
core generics subsidiaries of Big Pharma companies being sold.
Table 14: Selected Generics Deals Target Acquirer Product / Technology of target Allergan ‐ Actavis Teva Actavis generics business including factory 40,500 Par (US) Endo (US) US generics company 8,050 AMCo (UK) Concordia (CA) Branded and unbranded generics company 3,550 B. Ing. – Roxane (US) Hikma US generics company 2,775 Kremers Urban (US) Lanne (US) US generics company incl. factory 1,230+ Covis (US) Concordia (CA) Branded and unbranded generics assets 1,200 Famy (IN) Mylan Women’s health products business 800 Auden McKenzie (UK) Actavis (Allergan) UK unbranded generics company 458 AZ (Entocort) Mylan US product rights 380 © Medius Associates Ltd www.medius-associates.com
$m 28
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Consumer Health
At the beginning of last year it was announced that Boehringer Ingelheim (BI) and Sanofi would set up an alliance whereby BI would act as a CMO for cell culture opera ons for Sanofi’s biologics pipeline. The rela onship between the companies must be working because at the end of 2015, it was announced that Sanofi would acquire BI’s consumer health business and in return BI would acquire Sanofi’s animal health business, Merial. The enterprise value of BI’s consumer health is es mated at €6.7bn and Merial at €11.4bn. As a consequence BI will pay Sanofi €4.7bn ($5.1bn) cash. The transac on is expected to close 4Q2016. This deal follows the example set by GSK and Novar s in April 2014 with the establishment of a consumer health joint venture (GSK 63.5%) and the swap of oncology and vaccines businesses. The ra onale for these asset swaps is for each company to focus on core businesses where it can effec vely compete and to divest those where it cannot. For example Sanofi claims that the new consumer health business will be the number one consumer health player with sales of €5.1bn ($5.5bn) and a global market share of 4.6%. The market share number indicates how fragmented the consumer health business is and why consolida on is likely to con nue in spite of some commentators’ concerns regarding the difficulty of building local or regional brands into global brands. An alterna ve to a joint venture or an asset swap is a straight forward asset sale such as Merck & Co’s sale of its consumer health business to Bayer in 2014 for $14.2bn. In 2015 there have not been any significant deals of this type. Instead there have been a number of company and product acquisi on deals around the $200m usually for a price / sales mul ple of around 3. One excep on was the Perrigo acquisi on of brands from the GSK‐Novar s joint venture where the purchase price of $224m represented only 2x sales. The sale was a prerequisite of the European compe on authori es to agree to the joint venture where there would be overlapping products in one therapeu c area e.g. nico ne replacement therapy. In these situa ons, the assets are o en sold at low prices. While Perrigo may have got a bargain from GSK‐Novar s, it is unlikely it did so with the acquisi on of Naturwohl where the purchase price was 4.5x sales. Perrigo has been one of the most ac ve deal makers in the consumer health area, but there are other smaller companies who make transforma onal deals. For example in the Alliance Pharma in the UK acquired 27 brands (mainly dermatology) from Sinclair IS for $185m (2.9x sales). The addi onal sales will double the size of Alliance. In 2016 it is expected there will be further consolida on in the consumer health sector. Table 15: Consumer Health Deals Target Acquirer Product / Technology of target BI Consumer Health Sanofi Consumer health business excl. China DenTek (US) Pres ge Company with oral care products 225 GSK Novar s brands Perrigo Nico ne replacement, cough/cold, cold sore 224 thinkThin (US) Glanbia (IE) Company with protein‐enriched food bars 217 Sinclair IS (UK) Alliance (UK) Dermatology brands including Kelo‐Cote, Atopiclair 185 Naturwohl (DE) Perrigo Company with dietary supplement Yokebe 150 © Medius Associates Ltd www.medius-associates.com
$m 5,100 29
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Other Deals of Interest
Companies are con nuing to use interes ng mechanisms to fund ongoing businesses. Immediately a er announcing its licensing deal with Takeda for its ADC technology ($20m upfront, $210m in milestones) Immunogen announced a $200m non‐dilu ve royalty transac on with TPG Special Situa ons Partners (TSSP). Under the agreement, TSSP receives 100% on the revenues of Kadcyla which would be received from Roche up to a total value of either $235m or $260m (depending on ming). Therea er Immunogen receives 85% of the revenues through to the end of the royalty term. In a similar vein, Intarcia Therapeutics closed a $225m synthetic royalty financing with an equity conversion option at a $5.5bn company valuation. Convertible limited recourse notes have been purchased by investors who receive quarterly payments of 1.5% of global sales of ITCA 650, a novel once or twice yearly and injection‐free GLP‐1 therapy currently in phase 3 clinical development to treat type 2 diabetes. Other interes ng features are the condi onal milestones and payments which appear in the Five Prime agreement with Inhibrx for novel GITR an bodies. In this research collabora on and licence agreement, in addi on to the milestones ($324.5m) there is an upli of $100m if the FDA grants Breakthrough Therapy Designa on for the product. There is a similar feature in the op on agreement between Bavarian Nordic and BMS for Prostvac (a prostate specific immunotherapy). The agreement terms Include results based milestones where the payment could exceed $230m should the median overall survival benefit of Prostvac exceed the efficacy seen in phase 2 results. During 2014 several deals were reported around the sale of priority review vouchers (PRVs) as assets. This year only a few PRV sales were noted. In May Sanofi purchased a PRV from Retrophin and in August, AbbVie purchased a PRV from United Therapeu cs (see table below). The PRV is part of an incen ve programme established by the FDA to encourage development of drugs for rare paediatric diseases. The voucher en tles the holder to ask the FDA for priority review of a drug applica on that would otherwise get a standard review which can shorten the review process to 6 months from the standard 10 months. Table 16 : PRV Deals During 2015 PRV Holder
Purchaser
Subject
Retrophin Sanofi Paediatric PRV from FDA approval of Cholbam for bile acid synthesis and peroxisomal disorders 245 United Therapeu cs AbbVie Received for neuroblastoma treatment Unituxin 350 © Medius Associates Ltd www.medius-associates.com
Value $m
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Op ons con nue to play a major part in deals of all shapes and sizes, as well as for technologies at varying stages of development as noted in the table below. The scope of the op on rights that are granted ranges from the simple right to manufacture (Resverlogix/Shenzhen) through to the right to acquire the en re company (Promedior/BMS). In some cases, op ons are used as staging posts in an acquisi on as seen most recently in the deal between AstraZeneca and Acerta where AstraZeneca purchased an ini al 55% of equity with an op on on the remaining 45%. With a total headline value of $7bn ($4bn now, $3bn on exercise of the op on) this is a li le more gentle on the balance sheets spreading the cost. Many of the deals in table below are reports of the exercise of the op on rights, rather less frequently seen are the headlines where the op on is not taken up. It would not be unusual for the agreement to contain a press release embargo so nega ve news is just not reported. Certainly 2015 saw fewer formal reports of deal termina ons than was seen in 2014. Star ng out in 2016, the excep on to this was the closure of the deal between MannKind and Sanofi for inhaled insulin. Table 17 : Selected Deals which Include Op on Terms Licensor /
Partner Promedior / BMS Bavarian Nordic / BMS Pharmaxis / Boehringer Ingelheim Resverlogix / Shenzhen Hapalink Cellec s / Servier Rights Product / Technology Status Headline
$m Lead asset PRM‐151, recombinant pentraxin‐2 protein for idiopathic pulmonary fibrosis (IPF) 2 1,250 and myelofibrosis (MF) Prostvac for minimally symptoma c prostate Exclusive op on to license cancer; upfront of $60m, $80m fee on exercise 3 975 and commercialise of op on PXS4728A a highly selec ve oral small molecule inhibitor of vascular adhesion protein
Exercise of op on to 1 546 ‐1 that has shown ac vity in preclinical acquire asset inves ga on in non‐alcoholic steatohepa s (NASH) Op on to manufacture Licence to RVX208* a selec ve BET and supply as part of bromodomain inhibitor in cardiovascular 3 *400 equity investment and disease licence UCART19, CAR T immunotherapy allogeneic is Early exercise of op on to being tested for chronic lymphocy c 1 ready 338.2** leukaemia and acute lymphoblas c leukaemia an exclusive licence ** plus R&D financing Exclusive op on to acquire Promedior Selecta Biosciences / Sanofi Sanofi exercises op on to Immunotherapy in the treatment of coeliac license disease Genmab / Novo Nordisk pc 300 DuoBody technology to create bispecific Op on to exclusive or non
an bodies in 2 therapeu c programmes ‐exclusive licence ***depending on degree of exclusivity 252*** Immunogen / Takeda Op on to a third target Licence to 2 targets with ADC technology 230 Ablynx / Novo Nordisk Op on to expand collabora on to include second programme Mul specific Nanobody drug candidates Discovery 195 Agios / Celgene Celgene exercised its op on to an exclusive licence 1 120 # Canbex / Ipsen Exclusive op on to acquire Canbex 1 110 © Medius Associates Ltd AG‐120, a first‐in‐class, oral, potent inhibitor of the mutant IDH1 protein under the terms of the 2010 collabora on agreement # milestone payments Lead product VSN16R for trea ng spas city in MS, op on fee paid $6.8m; $103m due on exercise end of 2a www.medius-associates.com
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Conclusions
Coming off the back of a bumper deal making year in 2014, it was interes ng to see if 2015 would match up in deal produc vity. Certainly some companies have really stepped up their deal profile such as AstraZeneca, others have maintained their ac ve deal profiles such as Celgene. So, what are our predic ons for 2016? Can this fran c deal making pace be maintained? Our thoughts for 2016 are that the scope for pulling off major deals is ge ng more limited. The chase for innova on s ll seems to focus around the early stage deals with the new biotech companies, notwithstanding the fact that major pharma dollars are s ll required to reach the market. Areas for ac vity are predicted to be: 
R&D deals between Big Pharma and Big Pharma and possibly also involving NGOs 
Ongoing Big Pharma companies divestment of non‐core business areas 
Generics companies doing deals to diversify their por olios 
Deal ac vity for products and technologies to treat neurodegenera ve diseases 
Biotechs will remain the main innovators for new technologies This Annual Review is based on the Medius monthly Deal Watch ar cles which review the top pharma deals as announced by headline value plus other deals of note. Deals are recorded in the month of announcement but typically updated on deal closure. The headline value is as quoted in the various press releases, i.e. it is based on the sum of ini al (upfront / signature) payments, op on fees, R&D funding, development milestone payments, sales threshold and other success or con ngent payments, as cash or equity. This does not include royalty payments. Where possible, per programme figures are quoted. Whilst this review is not meant to be an exhaus ve trea se of every deal announced in 2015, our aim is to capture key trends and highlight novel approaches that may help the business development / licensing professional. Every effort is made to ensure that the informa on provided is accurate. The views expressed in this report are those of the authors; no representa on is made by Medius or any of the companies referred to in this document. © Medius Associates Ltd www.medius-associates.com
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Annual Review 2015
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Sharon Finch the founder of Medius, has extensive business development experience working both in industry and for over 20 years with Medius. Sharon works primarily on partner searches and transac ons. She is the Editor of the Business Development and Licensing Journal and is the Course Director for the MSc in Pharmaceu cal Business Development & Licensing run by the University of Manchester. Roger Davies works with Medius as a consultant in pharmaceu cal licensing and business development. Having personally completed many deals he specialises in valua ons, deal structuring and nego a ng licensing and acquisi on deals. He is the former Chairman of the UK Pharmaceu cal Licensing Group, and is the Finance module leader for the Business Development MSc at the University of Manchester. Jill Ogden has over 28 years of commercial and R&D experience in the biopharmaceu cals and healthcare industries from roles in biotechs and mid‐caps. Her main areas of focus have included product and technology deals covering biologics, drug delivery and other pla orms. She has led and been involved in a wide range of transac ons including licensing, divestment deals and corporate M&A. John Ansell works with Medius as a consultant in business development and interna onal marke ng, reflec ng his 20 years’ experience in the pharmaceu cal industry. He has worked on many Medius licensing projects over the past 17 years. He is the author of over 50 ar cles on pharmaceu cal issues and of the book Transforming Big Pharma (Gower Publishing, 2013). John is also Marke ng module leader for the Business Development MSc at the University of Manchester. Ros Munday works as a business consultant with Medius, bringing over 20 years of experience gained from the end to end management of OTC product por olios, incorpora ng product development and POM to P switching. Ros’s years spent working for a mul na onal pharma company have given her a good understanding of the posi oning of OTC businesses within this environment. Catharine Staughton supports Medius clients in various aspects of business development training, par cularly in product forecas ng, the financial structuring of licensing deals and all aspects of finance. Catharine gained her financial experience at Robert Fleming (now part of JP Morgan), and her business development experience at Medeva and An soma. Medius Associates are the Global partnering specialists who have provided business development services for over 20 years. Medius brings together in one place, decades of business development exper se from the healthcare and pharma industries. Medius provides a full range of business development services on a personalised, client specific basis and also provides training covering all aspects of business development and licensing in the healthcare arena. Tel: +44 (0) 20 8654 6040 E‐mail: dealwatch@medius‐associates.com © Medius Associates Ltd www.medius-associates.comwww.medius-associates.com
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