Pfizer, Allergan – back to the drawing board
Months in the making – years if you consider that Pfizer first sought an inversion deal with AstraZeneca in 2014 – the proposed $160-billion merger between Pfizer and Allergan collapsed in dramatic fashion  this week.
New regulations proposed by the US Treasury Department on Monday (April 4) appear designed not only to scupper future M&A intended to reduce exposure to US corporate tax rates, but specifically derail the Pfizer/Allergan deal.
CEO Brent Saunders has broadly hinted that Allergan will quickly return to the strategic path it was on prior to the deal, but it is Pfizer that arguably faces the more important decisions moving forward: Will it pursue a more traditional type of acquisition? Is it still committed to breaking up into two smaller companies? Or would it be bold enough to launch a second inversion bid on UK soil?
Is 'GlaxoZeneca' that far-fetched?
Pfizer's commitment to inversion would seem unlikely at this point, given its failure to complete two high-profile acquisitions designed to meet this goal and the nature of its standoff with the US government.
However, this has not prevented enthusiastic investors from speculating that Pfizer could make a second approach for AstraZeneca, prompting a 4.5-percent rise in the company's share price on Wednesday. Likewise, Shire's price was up 5 percent, while GlaxoSmithKline traded up 3 percent.
These companies would not be considered "serial inverters" of the ilk that new US Treasury Department regulations specifically target, but would Pfizer be willing to go toe-to-toe with the UK government, which aggressively defended AstraZeneca's efforts to remain independent in 2014?
Indeed, one analyst FirstWord spoke to suggested that a merger between AstraZeneca and GlaxoSmithKline – to create a long-touted 'UK centre of excellence ' – is the more likely deal at this point. Having spurned Pfizer's advances, AstraZeneca actually needs a big deal, the analyst argues, while Andrew Witty's retirement as GlaxoSmithKline CEO next year could provide convenient timing, he adds. Could any sniff of interest from Pfizer see UK politicians jump on the 'GlaxoZeneca' train?
Can Allergan lead biopharma stocks into the light?
One of the key questions being asked this week has been to what extent the Pfizer deal has protected Allergan from the prolonged contraction in specialty pharma valuations, driven primarily by events at Valeant Pharmaceuticals.
On Wednesday, Allergan CEO Saunders was quick to point out important differences in the aggressive acquisition strategies pursued by both companies over recent years. Speaking to Forbes , Saunders noted "the key difference is that we strongly believe in innovation and R&D and we have invested in innovation and R&D and we have invested heavily in making sure that in the areas that we focus on. We have sustainable growth through not just strong, long-lived marketed products but, equally important, R&D assets."
Pharma and biotech investors are hopeful that Allergan (and Pfizer), buoyed by lower valuations since mid-2015, will quickly get back into the acquisition game, prompting the Nasdaq Biotechnology Index to close up 6 percent on Wednesday. Saunders has signalled that the company will not hang around, with Allergan announcing late on Wednesday a deal to in-license experimental Alzheimer's disease treatments from Sosei's Heptares Therapeutics  unit potentially worth over $3 billion; in paying Heptares $125 million upfront, Allergan has effectively spent the break-up fee it received from Pfizer.
A biosimilar benchmark
As expected – following a positive advisory committee recommendation in February – the FDA this week approved Celltrion's Inflectra , a biosimilar version of Johnson & Johnson's Remicade, which will be marketed in the US by Pfizer. Inflectra is the second FDA-approved biosimilar and the first FDA-approved biosimilar monoclonal antibody.
A couple of things to note – Inflectra has been approved for each of the seven indications Celltrion applied for (relying heavily on extrapolation of data from two clinical studies) as per the 21 to 3 AdCom vote; it is equally important that the FDA structured a single vote to support approval in each of these indications two months ago (KOL Views: Celltrion's "fascinating" biosimilar AdCom shows that clinicians can be convinced by the concept of biosimilarity, says leading US regulatory expert Gillian Woollett )
In line with the FDA's recently published guidance on biosimilar labelling – listen here  for more thoughts – the label for Inflectra  is very similar to the Remicade label with a statement included at the top which informs physicians that Inflectra is a biosimilar version of Remicade. Also in line with the guidance, Infliximab has been assigned the generic name infliximab-dyyb. Use of the seemingly random 'dyyb' suffix suggests the FDA is leaning towards generic-like, non-proprietary suffixes, said Bernstein analyst Ronny Gal.
Despite the regulatory precedent set by FDA approval of Inflectra, some uncertainties remain . Pfizer is preparing for a US launch later this year, but intellectual property considerations could see this delayed until 2017 or 2018, suggest analysts. How quickly uptake occurs, and how any erosion of Remicade sales evolves, also remains unclear at this point; Johnson & Johnson estimate that 70 percent of patients are stable on therapy and are thus less likely to be switched.
Gilead doubles down in NASH
Gilead Sciences is threatening to increase excitement levels around the future revenue opportunities tied to non-alcoholic steatohepatitis (NASH). The company in-licensed a Phase I asset from Nimbus Therapeutics  this week and is now developing four separate mechanisms in early-to-mid stage testing. Investors may be looking at Gilead to do a big deal, but analysts are not surprised that management continues to make smaller bets at this stage, although NASH is now clearly a priority, they note. Significantly, Gilead has overlooked the more advanced NASH therapies in development at Intercept Pharmaceuticals and Genfit (ViewPoints: Investors wanting a big deal forced to settle for Gilead's long game in NASH )