ViewPoints: Will cancer immunotherapies drive the next wave of Big Pharma M&A?

The race to develop the next generation of oral, interferon-free hepatitis C therapies spurred a wave of M&A during 2011 and 2012, which peaked with Gilead Sciences' $11-billion acquisition of Pharmasset.

Purchases of that stature may be out of the equation, but a spate of recent licensing and acquisition activity suggests that growing levels of excitement around cancer immunotherapies could drive a succession of early-stage deals. As have recent comments from management at a number of companies, which suggest that a portfolio-approach will be critical in gaining success in the cancer immunotherapy market.

Insight, Analysis & Opinion

Roche's exclusive licensing agreement with Inovio Pharmaceuticals – at a potential cost of $420 million and announced on Tuesday – follows AstraZeneca's recent move to acquire Amplimmune for $500 million, with both deals expanding Big Pharma's position in the immunotherapy development space.

In both instances, Roche and AstraZeneca have cited the opportunity of combinational approaches to cancer immunotherapy as a decisive factor in shaping their business development choices.

Speaking to analysts at JP Morgan last week, AstraZeneca CEO Pascal Soriot suggested that his own previous experience at Roche had shaped his view that a portfolio approach will be key to success in the immunotherapy market (citing the rationale for developing Perjeta as an extension of the Herceptin franchise). Under this approach, various combinations of immunotherapies will provide different efficacy profiles across different tumour types, given that different products target different receptors. At this stage, added Soriot, it is not entirely evident what the optimal combinations will be.

One advantage of building a portfolio of immunotherapies early is that it will allow subsequent development programmes to advance without the need to enter complex collaborations with other companies (an issue that developers in the hepatitis C race have had to deal with). Thinking further ahead, Soriot suggests that the likely expensive pricing of cancer immunotherapies is already shaping how pipelines are evolving; in-house development of multiple immunotherapy candidates will more easily allow for pricing strategies to be implemented across a portfolio of products, says Soriot, again removing any requirement to negotiate with external collaborators.

Speaking to sell-side analysts on Monday, Merck & Co.'s head of R&D Roger Perlmutter was singing from the same hymn sheet as he positioned the company’s lead product MK-3475 front and centre of the company’s R&D pipeline, but also cautioned that in-licensing and acquisition opportunities in the immunotherapy development space are limited. Despite this, Perlmutter indicated that Merck is "aggressively looking for other cancer immunotherapies for in-licensing opportunities" – noted BMO Capital Markets analyst Alex Arfaei – to support a number of preclinical internal assets that will progress into the clinic next year for potential combinational use with MK-3475 (previously known as lambrolizumab).

Such will be the size of the immunotherapy market, Perlmutter also believes that there will be considerable scope for differentiation of products that are not necessarily first to market, another factor that could encourage developers to rapidly acquire potential complimentary products.

The immunotherapy development space would appear to hold considerable revolutionary potential for the treatment of cancer and, according to Perlmutter, has been "substantially de-risked" as a result of early-stage clinical data presented in recent months. In a note to investors summarising his take on Perlmutter's comments, Sanford C. Bernstein analyst Tim Anderson reiterated the view that it remains too early to know which combinations will work best – "and by extension, what on-market products could be at risk."

Deliberate in-licensing to bolster pipelines in this space is thus likely to occur, although this has not always been the case, with Perlmutter revealing on Monday that MK-3475 ended up at Merck by virtue of Schering-Plough's acquisition of Organon in 2007 (with Schering-Plough subsequently acquired by Merck in 2009). Anderson suggests that at the time of the Organon purchase, MK-3475 was not viewed as a "key asset." How times have changed.

To read more ViewPoints articles, click here.