After weeks of speculation that biopharma deal making would cool off, 2019 got off to a flying start as far as mergers-and-acquisitions (M&A) is concerned, thanks to two blockbuster transactions: Bristol-Myers Squibb’s planned $74 billion acquisition of Celgene, followed four days later by Eli Lilly’s planned $8 billion purchase of Loxo Oncology—a deal that quickly became the buzz of the J.P. Morgan 37th Healthcare Conference, held earlier this month in San Francisco.
During a “breakout” Q&A with analysts following a townhall-style address at the conference, Lilly Chairman and CEO David A. Ricks cautioned that, for his company at least, size isn’t necessarily what matters most when it comes to acquisitions: “I think scale probably destroys more value than it creates, particularly in R&D functions,” Ricks said, adding: “What matters is differentiation of assets.” Lilly has “plenty of capacity” to do acquisition deals every quarter, added Lilly senior vice president and CFO Joshua L. Smiley.
However, Ricks added that he foresaw an increase in M&A activity in 2019. He noted the mixed results shown by smaller biopharmas when it comes to successfully commercializing their own drugs once they reach the market— as well as the decline in market capitalization of biopharmas, which slumped along with most other public companies late last year.
Which biopharmas will be the next ones to be acquired? GEN has sought to answer that question in recent years through lists of takeover targets that have generated the most M&A buzz based on notes to investors and comments in news outlets.
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GEN has had some success predicting companies on the cusp of being bought out. GEN’s February 26, 2018, list included AveXis just two months before it found a buyer in Novartis, which completed its $8.7 billion acquisition of the gene therapy developer on May 15. Another company on that list, Tesaro, revealed December 3 it is being snapped up by GlaxoSmithKline for $5.1 billion. Only one of the 10 companies on our 2017 list found a would-be buyer (Juno Therapeutics, purchased by Celgene).
EvaluatePharma has tracked $136.5 billion in 173 biopharma M&A deals during 2018, compared with $79 billion in 183 deals in 2017. Last month, Informa Pharma Intelligence told GEN it counted about $265 billion in 2018 M&A, up 26% from $210 billion in 2017—including nontraditional “disruptive” healthcare deals such as the pending $69 billion CVS-Aetna merger.
Location: Boston, MA
Alexion Pharmaceuticals made a big splash late last year with two pipeline-building deals: Its planned up-to-$1.2 billion acquisition of Syntimmune, and its $637 million-plus collaboration with Dicerna Pharmaceuticals to discover and develop RNA interference (RNAi) therapies for complement-mediated diseases. But it’s the company’s less publicized lowering of its GAAP earnings per share (EPS) investor guidance for 2018—to between an 8 cents-per-share loss and 26 cents-per-share gain, from $1.25 to $1.50 per share—that has re-fueled speculation about Alexion being ripe for a buyout.
Given Alexion Pharmaceuticals’ 2018 market capitalization of $25 billion—No. 12 among the Top 25 Biotech Companies of 2018 as ranked by GEN—Ronny Gal, an analyst at Sanford Bernstein, views Alexion as a “Goldilocks” acquisition—not too big, not too small—telling MarketWatch the company would appear a logical acquisition target for Amgen, since it needs to lengthen and strengthen its pipeline yet is under shareholder pressure to contain R&D costs.
However, Bret Jensen, writing in SeekingAlpha, commented January 9 that another logical buyer for Alexion would be BioMarin Pharmaceutical—itself a perennial takeover target (see below)—since both companies focus on rare disease treatments.
Jensen noted that Alexion has a single marketed blockbuster, drug Soliris® (eculizumab), a treatment for paroxysmal nocturnal hemoglobinuria (PNH), atypical hemolytic uremic syndrome (aHUS), and generalized myasthenia gravis (gMG). Soliris is set to be supplanted in PNH in adults by Alexion’s newest marketed product which won FDA approval on December 21, Ultomiris® (ravulizumab)—not the least of reasons being a lower annual price tag ($458,000) than Soliris (over $500,000).
On December 10, Zacks Investment Research pegged three big pharmas as potential buyers: “Roche, Pfizer, or Novartis may be interested in buying Alexion.”
Location: Cambridge, MA
Alnylam made biopharma history in August 2018 when the FDA approved the company’s Onpattro™ (patisiran), the first-ever RNA interference (RNAi) treatment to win agency authorization. The European Commission followed suit soon after.
After generating $500,000 in revenue and 125 patient start forms during the third quarter, Alnylam announced January 7 that Onpattro racked up $11 million to $12 million in unaudited net global product revenues in Q4. Approximately 550 total patients worldwide received Onpattro commercially during the fourth quarter, of which over 200 patients were in the U.S. (where 250 start forms were submitted) and the E.U.
Alnylam’s investors hope the company can capitalize on that history and early performance by finding a buyer. Market watcher Barry Cohen, a veteran biopharma marketing executive, identified in GuruFocus a likely Alnylam buyer—Sanofi, whose Sanofi Genzyme subsidiary purchased $700 million worth of Alnylam stock when the companies began partnering in 2014.
Kinjel Shah of Zacks Investment Research also pinpointed Sanofi as a potential acquirer, noting on December 10 that Alnylam also offers the presence of two late-stage candidates in its pipeline.
One is givosiran, a potential treatment for acute hepatic porphyria (AHP) that targets aminolevulinic acid synthase 1 (ALAS1). The other is inclisiran, which Alnylam has partnered with The Medicines Company to develop for hypercholesterolemia.
In September, Alnylam announced positive interim results for givosiran from the Phase III ENVISION trial showing a significant reduction of urinary aminolevulinic acid (ALA), a biomarker for AHP. Alnlam has disclosed plans to launch a rolling submission of an NDA and pursue full approval based on complete results from ENVISION early this year.
As for inclisiran, The Medicines Company said in October that the Independent Data Monitoring Committee for inclisiran’s three Phase III clinical trials (ORION 9, ORION 10, and ORION 11) recommended that the trials continue without modification following a fourth planned review of safety and efficacy data.
Location: Dublin, Ireland
Notwithstanding its lead drug, there’s nothing fishy about Amarin to many biopharma observers. The company first won approval for its fish-derived Vascepa® (icosapent ethyl) in 2012 as an adjunct to diet to reduce triglyceride levels in adults with severe hypertriglyceridemia.
Before the end of the first quarter, Amarin plans to submit a supplemental NDA in the U.S. for an expanded label for Vascepa reflecting its cardioprotective effects as shown in the 8179-patient Phase III REDUCE-IT™ trial. On September 24, Amarin presented very positive topline results from REDUCE-IT, followed on November 10 by additional trial data at the 2018 Scientific Sessions of the American Heart Association in Chicago.
Amarin said Vascepa met its primary endpoint by generating a 25% relative risk reduction (RRR) in first occurrence of major adverse cardiovascular events (MACE) consisting of a composite of cardiovascular death, nonfatal heart attack, nonfatal stroke, coronary revascularization, and unstable angina requiring hospitalization. Vascepa also met key secondary endpoints, including a 20% reduction in cardiovascular death, and a 26% RRR in a composite of cardiovascular death, nonfatal heart attack, and nonfatal stroke.
Investors sent shares zooming to $12.40 the day of the September data announcement from $2.99 the previous trading day. Since then, shares have dipped, then climbed, closing at $17.23 on January 18.
The stock surge has fueled takeover talk. StreetInsider on January 10 reported Pfizer as preparing to bid for Amarin; the companies have not commented. And on October 16, Luke Lango, founder of San Diego-based investment fund L&F Capital Management, noted that while Amarin’s market cap was about $6 billion, its potential to expand its treatment population could potentially disrupt a market estimated to exceed $500 billion.
“With such a small market cap, such a huge breakthrough treatment, and such a massive global opportunity, Amarin is an exceptionally attractive M&A target for big biotech companies like Amgen, Regeneron, and Sanofi,” Lango declared in InvestorPlace. “I fully expect a buyout to materialize soon, and even if it doesn’t, Amarin stock still has a lot of firepower from Vascepa to head higher.”
Location: San Rafael, CA
Biopharma industry watchers have long pegged BioMarin Pharmaceutical as a takeover target—the company has appeared on every such GEN List compiled since the first such list in 2013—and the speculation has shown no sign of cooling down this year.
During the recent J.P. Morgan 37th Healthcare Conference in San Francisco, BioMarin Chairman and CEO Jean-Jacques Bienaimé highlighted development and regulatory milestones expected this year. They include submission of a BLA for valoctocogene roxaparvovec (“val rox” or BMN 270), a gene therapy Factor VIII for hemophilia A, through an accelerated approval pathway during the second half of 2019, based on completion of a Phase III study targeting enrollment of 130 patients by mid-year 2019. BioMarin also expects to read out topline results from the fully enrolled Phase III study of vosoritide, indicated for children with achondroplasia, by year’s end.
BioMarin is also hoping for European Commission approval for Palynziq® (pegvaliase) Injection for patients 16 and older with phenylketonuria (PKU). An advisory opinion from the European Medicines Agency’s Committee for Medicinal Products for Human Use is expected during Q1. BioMarin said an approval is expected to add between $70 and $100 million to its 2019 revenue.
Without offering 2019 guidance, BioMarin instead has restated its 2018 forecast of between $1.47 billion and $1.53 billion—a jump of between 12% and 16.5% over 2017—as well as a net loss of between $115 million and $165 million, which explains why the company remains a takeover target. The company has said, however, that by 2020, it projects a combined $2 billion in revenues from its seven currently approved products.
“It is a comparatively low-risk acquisition for a big pharma firm looking to add to its drug offerings and fend off the decline in revenue associated with patent expiration and competition,” stock analyst Jeff Reeves wrote January 10 in MarketWatch.
Location: Boulder, CO
AstraZeneca’s planned $5.1 billion acquisition of Tesaro led to speculation among biotech stock watchers that other developers of poly ADP ribose polymerase (PARP) inhibitors would soon find buyers. One such developer is Clovis Oncology, where activist shareholder Armistice Capital has contacted the company’s management urging it to find a buyer, according to a December 17 Bloomberg report based on an unnamed source.
Clovis has reason to listen closely: Armistice disclosed in a November 5 regulatory filing that it has become Clovis’ second-largest shareholder with a 9.8% stake, by shelling out $116.5 million to increase its ownership to 5.15 million shares. And while Rubraca® (rucaparib) saw its product revenue jump about 69% during Q1–Q3 2018 to $65 million from $38.5 million a year earlier, Clovis’ PARP inhibitor is lagging behind competitors. For example, Tesaro’s PARP inhibitor Zejula® (niraparib) has racked up $169 million during the first nine months of last year. And Lynparza® (olaparib) has generated $438 million in Q1–Q3 sales for AstraZeneca and $126 million in share of profits for commercialization partner Merck & Co.
With AstraZeneca set to buy Tesaro and Zejula, “[Clovis] will become the only standalone PARP, which we believe makes it the most likely takeout target in 2019,” Gabelli analyst Jing He said in a note to investors. In addition to labeling Clovis the most likely takeout target in 2019, He has identified three “most interested” potential buyers for the company: Bristol-Myers Squibb, Sanofi, and Roche.
One possible attraction for a Clovis buyer would be the prospects for a new indication based on positive initial data from the ongoing TRITON studies of Rubraca in advanced prostate cancer. Initial TRITON2 data showed a 44% confirmed objective response rate (ORR) in 25 Response Evaluation Criteria in Solid Tumors [RECIST]/Prostate Cancer working Group [PCWG3] response-evaluable patients with a BRCA1/2 alteration. A 51% confirmed prostate specific antigen (PSA) response rate was also seen in 45 PSA response-evaluable patients with a BRCA1/2 alteration.
Location: Foster City, CA
Bristol-Myers Squibb got the biopharma year off to a flying start on January 3 by announcing plans for a $74 billion acquisition of Celgene, a deal designed to build a powerhouse in immunology and inflammation, cardiovascular disease, and especially oncology. The blockbuster deal touched off chatter among market watchers that numerous other big biotechs were headed for takeovers—notably Gilead Sciences. Its shares were upgraded to “Outperform” by Oppenheimer analyst Hartaj Singh, who according to Barron’s cited the company’s potential to attract a buyer as he set an $85 price target (shares closed the day of the BMS-Celgene announcement at $65.25). Singh cited expectations that Daniel O’Day, who will become Gilead’s chairman and CEO effective March 1, will lead the company to better results, a revitalized pipeline, and strong clinical data later this year, going so far as to predict: “Gilead is poised to get its mojo back.”
Gilead is counting on additional positive data for filgotinib, which the company is co-developing with Galapagos, after trumpeting in September how the JAK1 inhibitor candidate met its primary endpoint in the Phase III FINCH 2 trial in adults with moderate-to-severe active rheumatoid arthritis (RA) and prior inadequate response/intolerance to biologic agents. Gilead is also planning to announce Phase II and III results for its nonalcoholic steatohepatitis (NASH) candidate selonerstib in the first half of this year.
Michael Yee of RBC Capital Markets added Gilead to a short list of buyout candidates that included Alexion Pharma (see above), Biogen, and Vertex Pharmaceuticals. In a note to investors cited by Investor’s Business Daily, RBC said one reason Gilead may be interested in being acquired is the loss of U.S. patent exclusivity in 2025 for HIV combination drugs Complera® (emtricitabine, rilpivirine, and tenofovir disoproxil fumarate) and Odefsey® (emtricitabine/rilpivirine/tenofovir alafenamide), and ensuing prospect of competition via generics or biosimilars: “The need to make up for lost sources of revenue and stimulate growth may encourage future M&A.”
Global Blood Therapeutics (GBT)
Location: South San Francisco, CA
Global Blood Therapeutics (GBT) is basking in the investor glow generated by positive Phase III results for its oral, once-daily sickle cell disease candidate voxelotor (formerly GBT440) in patients age 12 and older. The results were favorable enough for analysts Jared Holz of Jefferies and Michael Yee of RBC to include GBT among six potential buyout targets they identified January 15 in MarketWatch.
On December 3, presenting results at the American Society of Hematology (ASH)’s 60th Annual Meeting & Exposition in San Diego, GBT said voxelotor met its primary endpoint in the Hemoglobin Oxygen Affinity Modulation to Inhibit HbS Polymerization (HOPE) Trial (GBT440-031) by showing 65% of patients dosed at 1500 mg and 33% of patients dosed at 900 mg achieved >1 g/dL increase in hemoglobin at 24 weeks following treatment, compared with 10% of patients taking placebo.
Investors responded to the good clinical news with a stock surge that sent the price of GBT shares up 48% the day of the announcement, to $46.62 from $31.54 the previous trading day (shares closed at $48.87 on January 18). Wedbush analyst Liana Moussatos has projected voxelotor will launch in August 2020, generate $40.1 million in 2020 sales, and reach blockbuster status with more than $1 billion in sales by 2023.
The clinically meaningful and statistically significant increase in hemoglobin led the FDA to agree to GBT’s plan to submit an NDA for voxelotor under an accelerated approval pathway. At the J.P. Morgan 37th Healthcare Conference, GBT said it has scheduled a pre-NDA meeting with the agency, following which it plans to submit its NDA in the second half of 2019.
Also at J.P. Morgan, GBT said it anticipates launching a pivotal study in 2021 for inclacumab, a candidate for vaso-occlusive crises (VOC) in SCD patients. In August 2018, GBT gained a license from Roche in return for paying the pharma giant $2 million upfront, potentially up to $125 million in milestone payments, plus royalties.
Location: Wilmington, DE
Incyte is among the smaller of the big biotechs given its market capitalization of about $12.6 billion (No. 21 in GEN’s top-25 ranking). That makes the company a potential bargain for a buyer given its blockbuster JAK inhibitor Jakafi® (ruxolitinib), which crossed the billion-dollar net product revenue threshold during Q3 2018.
Jakafi has two rare blood cancer indications in polycythemia vera and myelofibrosis—and could be FDA-approved for a third, steroid-refractory acute graft-versus-host disease (GVHD), depending on the outcome of the FDA’s Priority Review; Incyte has a PDUFA date of February 24 in GVHD. That has helped rekindle buyout interest in Incyte, as has the prospect of additional indications for arthritis treatment baricitinib in partnership with Eli Lilly—which has launched a Phase III trial of the drug in systemic lupus erythematosus, and a Phase II/III adaptive design trial in severe alopecia areata.
The retirement of CFO David Gryska at the end of 2018 led RBC Capital Markets analyst Brian Abrahams to conclude that investors no longer valued Incyte as a target for acquisition, reasoning that investors could scoop up shares for long-term investment at prices of below $70: “We believe any premium placed on potential near-term [M&A] was effectively eliminated from the shares,” Abrahams concluded in a note to investors reported by Investor’s Business Daily. Incyte’s price has yo-yoed in recent weeks, bouncing from $58.50 on December 24 to $78.42 on January 18.
Incyte was among 10 biopharmas cited as takeover targets in a Bloomberg News survey of 20 M&A/event-driven trading desks, analysts, and fund managers—as well as one of 10 companies on the “Biotech Buyout Watchlist for 2019” published by stock website “PrecisionTrade365.”
Location: San Diego, CA
When Neurocrine Biosciences appeared on GEN’s 2017 list of takeover targets, the company was awaiting the FDA approval it would receive a month later for its once-daily tardive dyskinesia treatment Ingrezza® (valbenazine).
Since then, Neurocrine won FDA approval for a second drug following a collaboration with AbbVie, the endometriosis treatment Orilissa® (elagolix). Orilissa was authorized in July 2018 as the first and only oral gonadotropin-releasing hormone (GnRH) antagonist specifically developed for women with moderate-to-severe endometriosis pain.
AbbVie predecessor Abbott agreed to partner on elagolix in 2010 by paying Neurocrine $75 million upfront, up to $480 million in milestone payments—of which $115 million was paid as of September 30, 2018, according to a regulatory filing—and up to $50 million in commercial milestone payments.
“With a buyout, [AbbVie] gets full access to Orilissa without royalty and milestone fees for future indications,” observed Aaron Levitt, an independent investment analyst and author in State College, PA, in InvestorPlace.
Levitt said an AbbVie buyout of Neurocrine also made sense given Ingrezza’s results and market capitalization. The drug enjoyed a projected $409 million in preliminary 2018 net product sales, Neurocine announced during the J.P. Morgan 37th Healthcare Conference—more than triple the $116.6 million generated in 2017. The company plans a formal release of 2018 results February 5.
“Ingrezza is quickly becoming a major money marker for [Neurocrine]. That would fill a nice hole in AbbVie’s revenue stream and would help pay for the deal over the long haul,” Levitt added.
Not all Neurocrine’s news has been positive lately. Its market cap shrunk to $7.5 billion after the failure of the Phase IIb T-Force GOLD Study assessing Ingrezza in an additional indication, children and adolescents with moderate to severe Tourette syndrome. Ingrezza missed its primary endpoint of change from baseline of the Yale Global Tic Severity Scale Total Tic Score at week 12 vs. placebo.
Neurocrine was also one of six companies identified earlier this month as a buyout candidate by analysts Jared Holz of Jefferies and Michael Yee of RBC.
Location: South San Francisco, CA
Portola Pharmaceuticals rang out 2018 with welcome news from the FDA. On December 31, the agency approved the company’s Prior Approval Supplement for its large-scale, second generation Andexxa® [coagulation factor Xa (recombinant), inactivated-zhzo] manufacturing process, allowing for broad commercial launch in the United States.
Andexxa was approved as the first and only antidote indicated for patients treated with Bayer/Janssen [Johnson & Johnson]’s Xarelto® (rivaroxaban) or Bristol-Myers Squibb/Pfizer’s Eliquis® (apixaban), when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding.
“There is significant need for a specific reversal agent that can address life-threatening bleeding associated with the use of the Factor Xa inhibitors apixaban and rivaroxaban,” Portola President and CEO Scott Garland said in a statement that cited approximately 140,000 U.S. hospital admissions attributable to Factor Xa inhibitor-related bleeding in 2017.
That significant need is also likely to generate buyout interest in Portola, according to one biotech stock watcher: “It would be a small and logical acquisition for the large anticoagulant makers like Pfizer, Bristol-Myers Squibb, and Johnson & Johnson,” Bret Jensen wrote January 9 in SeekingAlpha. In June, the website carried an upbeat assessment by analyst Richard Marzouka declaring Portola a “compelling” M&A target: “This company is primed for a buyout.”
Andexxa first won FDA approval in May under the FDA’s Accelerated Approval pathway based on the change from baseline in anti-Factor Xa activity in healthy volunteers. But without its manufacturing process, it was unlikely to generate significant sales; Andexxa generated just over $10 million in net product revenue in Q1–Q3 2018.
Garland took office effective October 8, succeeding William Lis, who retired as of August 1. That retirement, as well as the need for larger-scale manufacturing, had been speculated as potential challenges that would hasten an acquisition of Portola by a big pharma buyer, but that didn’t happen.
Date: September 16, 2019