Friday Five – The pharma week in review (16 January 2020)

Report predicts continued investment in bio-pharma M&A as JPM fails to deliver an early uplift

Investors were left disappointed on Monday by a lack of major acquisition or in-licensing deals to coincide with the start of the annual J.P. Morgan Healthcare Conference in San Francisco. By comparison, Eli Lilly kicked off proceedings last year by announcing its $8-billion buyout of Loxo Oncology.

Ernst and Young (EY) also released its annual report on healthcare deal-making, predicting that activity in 2020 is unlikely to surpass the $357 billion that was spent last year across the pharma, biotech and medtech sectors; partly as these deals are still being digested and partly as there is a notable valuation gap “between what buyers expect and sellers want.” (BioNTech’s acquisition of Neon for $67 million on Thursday suggests when prices fall sufficiently deals will happen).

Analysis - Spotlight On: The year in review – M&A in 2019

Financial capacity for M&A within the pharma and biotech sectors remains high, nevertheless, and the largest acquisitions over the next 12 months will be driven by companies with "acute growth gaps" predicted EY consultant Peter Behner. That said, most large cap players (outwardly at least) appear content with their current positioning and outlook, with a consistent message that smaller ‘bolt on’ deals will be the focus in 2020 - even Gilead, which inferred any acquisitions will focus on areas where it already has expertise. 

Gene and cell-based therapies will continue to be a leading area of M&A investment as will a desire to "deepen therapeutic focus," says EY. The report highlights Big Pharma's general reluctance to acquire companies specialising in digital technologies in favour of partnership-building, partly as returns on investment remain theoretical, its authors conclude.

The question now is whether a post-conference flurry of M&A and licensing deals are announced in the coming months as a result of discussions that started this week on the west coast.

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VC aims to upturn the bio-pharma applecart

If you are willing to believe the hype the most potentially disruptive announcement timed to coincide with the start of J.P. Morgan was the unveiling of EQRx, a new company helmed by the venture capitalist Alexis Borisy.

It aims to quickly develop new drugs that offer comparable clinical profiles to standard-of-care medicines (without infringing intellectual property) and sell them at a significantly lower price; in essence re-defining the ‘fast follower’ strategy. To achieve this, EQRx aims to close a disconnection between the prices currently being charged for new medicines and the technological advancements that can be used to develop them, suggests Borisy.

The ambitions here are lofty, although Borisy has credential as the co-founder of both Foundation Medicine and Blueprint Medicines. He has also put together a strong management team, which includes Roche's former chief medical officer and head of global product development Sandra Horning and Peter Bach, who is director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering. EQRx has launched with an initial investment of $200 million.

Versus the relatively blunt solutions which could potentially be provided by legislative changes in the US drug market, EQRx's blueprint is being pitched as a more sophisticated market-based solution. Success will also depend, however, on insurers and payers – and to some extent, physicians – buying into Borisy's concept in order to re-shape the market so it is conducive to this model.

Further details, such as whether EQRx plans to run head-to-head clinical studies for each of its new drugs or what disease areas it will prioritise, have yet to be disclosed, though Borisy has said the company aims to bring one new drug to market within the next five years and 10 in the next decade.

This piece by the well-respected blogger Derek Lowe on the challenges facing EQRx is well worth a read and has prompted considerable debate on social media.

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Roche drops big hint about SMA pricing strategy

Meanwhile, some companies can claim to already be launching novel drugs at a more-than-marginally lower price than established competitors. Roche, having seen this strategy contribute to the strong launch of its new multiple sclerosis (Ocrevus) and haemophilia A (Hemlibra) products over the past two years, used the J.P. Morgan Healthcare Conference as the backdrop to confirm that it will follow a similar practice if and when the FDA approves its experimental spinal muscular atrophy (SMA) treatment risdiplam later this year, Reuters reported.

This could have significant implications for Biogen and Novartis, which both market SMA therapies. Key opinion leaders believe that risdiplam, poised to become the first oral treatment for SMA, could pose a particularly competitive threat to Biogen's Spinraza, which requires intrathecal injection and costs $750,000 in the first year and $375,000 thereafter. Zolgensma is a gene therapy that requires one-time administration at a cost of $2.1 million.

Citing products Roche is developing for Huntington's disease, Parkinson's disease, Alzheimer's disease and autism, pharmaceuticals CEO Bill Anderson predicted that the next decade could represent a high point for neuroscience R&D, analogous to the success in oncology witnessed over the past 10 years.

You can read our coverage of key company highlights from the first three days of the J.P. Morgan Healthcare Conference here…

J.P. Morgan 2020 as it happened...Day 1

J.P. Morgan 2020 as it happened...Day 2

J.P. Morgan 2020 as it happened...Day 3

Consensus suggests the conference was slightly quieter this year, indicating that its importance may be waning and companies are less committed to using the event as a backdrop for notable annoucements; a reflection, perhaps, of the year-round newsflow which emanates from the sector.  

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Momentum builds for Amarin

Amarin's week started on a positive note with two would-be competitors appearing to fall by the wayside. By Wednesday, CEO John Thero was telling delegates in San Francisco that the company is looking to build out a manufacturing capacity large enough to support potential peak sales of $5 billion for its cardiovascular treatment Vascepa; which was granted expanded labelling by the FDA late last year on the strength of data showing it reduces the risk of heart attacks and strokes.

Thero also suggested that setbacks to competitors had validated Amarin's decision to hold back on a European marketing deal for Vascepa, noting that he has been approached by a number of interested companies. The value of any deal to Amarin should increase further should it emerge successful from ongoing patent litigation with a number of generics manufacturers. A decision is expected by March.

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MorphoSys scores $750-million deal with Incyte 

One notable deal announced to coincide with the J.P. Morgan Healthcare Conference will see Incyte pay $750 million upfront to develop and commercialise MorphoSys' anti-CD19 antibody tafasitamab, which is being developed for the treatment of B-cell malignancies.

It could be approved for relapsed/refractory diffuse large B-cell lymphoma (DLBCL) in the US by mid-2020 and is also being developed for frontline DLBCL, follicular lymphoma, marginal zone lymphoma and chronic lymphocytic leukaemia.

MorphoSys views tafasitamab as a potential blockbuster product and the partnership with Incyte as a means to support these commercial aspirations. For Incyte, the deal bulks out a pipeline that has looked relatively sparse since the well-publicised setback for epacadostat two years ago; it could drive long-term revenue diversification without disrupting the company's current haematology-focused commercial infrastructure, suggested analysts. Incyte has also suggested that tafasitamab will be evaluated in combination with wholly-owned assets in its pipeline, such as the PI3K-delta inhibitor parsaclisib.

However, given the significant upfront payment some may view the deal as a bold move by Incyte, particularly in light of the recent decision to increase planned patient enrolment of B-MIND, MorphoSys' ongoing study in first-line DLBCL.

Analysts at Stifel suggest that increasing the study size from 300 to 450 patients "implies the ITT population did not pass the pre-specified futility boundary and the addition of more patients looks to increase the statistical power around the smaller number of biomarker positive patients (those with a low natural killer – or NK – cell count)." They add that in addition to the biomarker subgroup representing an approximate 50% reduction in addressable market opportunity, the utilisation of bendamustine as a backbone therapy in this study could serve to limit commercial uptake.

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