Mid-Year Review: The Top 10 Pharma Deals of 2019 Thus FarBy
What have been the key deals among pharmaceutical companies thus far in 2019? From pending mega mergers of Bristol-Myers Squibb and Celgene and AbbVie and Allergan to Gilead’s large-scale R&D pact with Galapagos, DCAT Value Chain Insights gives its 10 top deals that should be on your radar.
First-half action: the top 10 deals of 2019
1. Bristol-Myers Squibb’s pending $74-billion acquisition of Celgene. At the top of the list is one of the first deals announced in 2019—Bristol-Myers Squibb’s (BMS) pending $74-billion acquisition of Celgene. The deal, which combines two Top 20 pharmaceutical companies, was announced in January (2019) and would place the combined company among the top 10 pharmaceutical companies. The closing of the deal, which was initially slated for the third quarter of 2019, has been pushed out to the end of 2019 or the beginning of 2020. As part of the review by the US Federal Trade Commission (FTC), BMS is planning to divest Celgene’s Otezla (apremilast), a drug for treating certain types of psoriasis and psoriatic arthritis and which had global net sales of $1.6 billion.
In 2018, the companies had combined sales of nearly $38 billion; BMS had 2018 global revenues of $22.56 billion and Celgene $15.28 billion. With the Otezla divesture, the combined company will have eight products with more than $1 billion in annual sales in core disease areas of oncology, immunology and inflammation, and cardiovascular disease. Key drugs are BMS’ immuno-oncology drug, Opdivo (nivolumab), and the anticoagulant, Eliquis (apixaban), respectively with 2018 sales of $6.735 billion and $6.438 billion, and Celgene’s multiple myeloma drug, Revlimid (lenalidomide), with 2018 sales of $9.685 billion.
The combined company would also have near-term launch opportunities representing more than $15 billion in revenue potential, according to the companies at the time of the announced merger in January. On a pipeline basis at the time of the announcement in January, the combined company had 10 late-stage (Phase III assets) with six products expected to be launched in the next 24 months and more than 20 products in immuno-oncology for lifecycle management. For early-stage (Phase I and Phase II), key therapeutic areas are: oncology for solid tumors and immuno-oncology with 21 products: 10 oncology hematology products; 10 drug candidates in immunology and inflammation; and nine products in cardiovascular and fibrosis.
The deal would also provide BMS a position in cell therapies. In 2018, Celgene acquired Juno Therapeutics for approximately $9 billion, a company that is developing chimeric antigen receptor T cell (CAR T) therapies and T cell receptor (TCR) therapeutics for multiple targets and cancer indications. A key addition to Celgene’s lymphoma program was Juno’s JCAR017 (lisocabtagene maraleucel; liso-cel), a CD19-directed CAR T therapy for treating relapsed and/or refractory diffuse large B-cell lymphoma. At the time of Celgene’s announced acquisition of Juno in January 2018, Celgene said it expects, pending regulatory approval, potential global peak sales of approximately $3 billion.
|Table I: DCAT Value Chain Insights Top Pharma Deals of 2019 (as of July 15, 2019).|
|1||Bristol-Myers Squibb’s pending $74-billion acquisition of Celgene|
|2||AbbVie’s pending $63-billion acquisition of Allergan|
|3||Takeda’s completed $62-billion acquisition of Shire|
|4||Gilead’s pending $5-billion R&D pact with Galapagos|
|5||Pfizer’s pending $11.4-billion acquisition of Array Biopharma|
|6||Eli Lilly and Company’s $8-billion acquisition of Loxo Oncology|
|7 and 8||Novartis’ spin-off of eye-care device business Alcon and $5.3-billion deal for Takeda’s eye-care drug Xiidra|
|9||GlaxoSmithKline’s completed $5.1-billion acquisition of Tesaro|
|10||Roche’s pending $4.3-billion acquisition of Spark Therapeutics|
Source: Compiled by DCAT Value Chain Insights editorial staff using company information.
2. AbbVie’s pending $63-billion acquisition of Allergan. A second mega merger announced in 2019 is AbbVie’s proposed $63-billion acquisition of Allergan, a deal announced in late June (2019). The deal would create a company with projected 2019 annual combined revenue of approximately $48 billion with a key position in several franchises: immunology, hematologic oncology, medical aesthetics, neuroscience, women’s health, eye care and virology. The transaction is expected to close in early 2020.
Both Allergan and AbbVie had previously been involved in recent mega mergers that did not come to fruition and which were both called off due to uncertainty at the time of US policy for corporate inversions, a practice by which a US-based multinational company restructures so that the US parent is replaced by a foreign corporation as a means to achieve a lower tax rate. The potential of lower corporate tax rates was part of the rationale for Pfizer’s proposed $160-billion merger with Dublin, Ireland-headquartered Allergan in 2015, and in AbbVie’s proposed $55-billion acquisition of Jersey, UK-incorporated Shire in 2014. In 2016, Pfizer called off its proposed $160-billion merger with Allergan, which would have been the largest merger in the history of the pharmaceutical industry, and AbbVie called off its merger with Shire in 2014; Shire was later acquired by Takeda for $63 billion in a deal completed earlier this year (January 2019).
AbbVie’s impetus to acquire a large asset is due to generic-drug competition for the company’s top-selling drug, Humira (adalimumab), an anti-inflammatory drug approved for multiple indications with global 2018 sales of $19.94 billion, accounting for 61% of AbbVie’s total 2018 revenues of $32.73 billion. Biosimilar versions of Humira were launched in Europe in 2018 but due to agreements by AbbVie with other companies, a biosimilar of Humira will not launch in the US until 2023. In seeking to acquire Allergan, AbbVie will gain a company with two blockbuster drugs, Restasis (cyclosporine ophthalmic emulsion), a drug to treat dry eyes with 2018 sales of $1.26 billion, but which also faces generic competition, and Botox (botulinum toxin), approved for both medical and aesthetic uses and Allergan’s top-selling product with 2018 global sales of $3.58 billion.
3. Takeda’s completed $62-billion acquisition of Shire. A mega deal completed earlier this year (January 2019) is Takeda’s $62-billion acquisition of Shire. The deal creates a new Top 10 pharma company with annual revenues of $30-plus billion. The deal gives Takeda both reward—increased product diversification and a larger footprint in the US—but also risk—$30.85 billion in new borrowing to finance the deal, an important challenge faced by Christophe Weber, President and Chief Executive Officer of Takeda.
Key business areas for a combined Takeda/Shire are oncology, gastroenterology (GI), neuroscience, rare diseases, and plasma-derived therapies and also a position in vaccines. With the acquisition of Shire, Takeda gained complementary positions in GI and neuroscience and provided it with positions in rare diseases and plasma-derived therapies to complement its existing position in oncology, an area that Takeda enhanced with its $5.1-billion acquisition of Ariad Pharmaceuticals in 2017. Takeda gained positions in rare diseases and plasma-derived therapies, a position that Shire strengthened through its $32-billion acquisition in 2016 of Baxalta, the biopharmaceutical company spun off from Baxter Healthcare. Across therapy areas, rare diseases represent Shire’s main strategic focus. In 2017, Shire’s Rare Disease Division accounted for approximately $11 billion in revenues or approximately 72% of the company’s total revenues.
4. Gilead’s pending $5-billion R&D pact with Galapagos. Although not a merger or acquisition, a deal of importance is Gilead’s $5-billion, 10-year research and development collaboration with Galapagos, a Mechelen, Belgium-based pharmaceutical company focused on small molecules with late-stage products with indications in inflammation, fibrosis, osteoarthritis and other indications.
Under the deal with Gilead, announced earlier this month (July 2019), Galapagos will receive a $3.95-billion upfront payment and a $1.1- billion equity investment from Gilead. In return, Gilead will gain access to a portfolio of compounds, including six molecules currently in clinical trials, more than 20 preclinical programs, and a drug-discovery platform. Gilead will further receive an exclusive product license and option rights to develop and commercialize all current and future programs in all countries outside Europe. The transaction, which is expected to close late in the third quarter of 2019, is subject to certain closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and receipt of merger control approval from the Austrian Federal Competition Authority.
Key pieces of the collaboration involve Galapagos’ GLPG1690, a Phase III candidate for iterating idiopathic pulmonary fibrosis, and GLPG1972, a Phase IIb candidate for treating osteoarthritis, Both are first-in-class compounds and could offer important mid- and late-stage pipeline opportunities for Gilead, according to the company.
5. Pfizer’s pending $11.4-billion acquisition of Array Biopharma. Last month (June 2019), Pfizer agreed to acquire Array Biopharma, a Boulder, Colorado-based commercial-stage biopharmaceutical company for $11.4 billion. Array Biopharma is focused on the development of small molecules for cancer and other diseases. The deal is expected to close in the second half of 2019.
Array’s portfolio includes the approved combined use of Braftovi (encorafenib) and Mektovi (binimetinib) for the treatment of BRAFV600E or BRAF V600K mutant unresectable or metastatic melanoma. The combination therapy is currently being investigated in over 30 clinical trials across several solid tumor indications, including a Phase III trial in BRAF-mutant metastatic colorectal cancer.
In addition to the combination therapy for BRAF-mutant metastatic melanoma, Array has a broad pipeline of targeted cancer medicines in development as well as a portfolio of out-licensed medicines. Array’s pipeline includes several additional programs being advanced by Array or current license-holders, including the following programs currently in registration trials: selumetinib (partnered with AstraZeneca), LOXO-292 (partnered with Eli Lilly and Company), ipatasertib (partnered with Roche’s Genentech), tucatinib (partnered with Seattle Genetics), and ARRY-797. Array is also partnered with Bayer for Vitrakvi (larotrectinib), which is approved in the US for treating certain tumors and with Roche for Ganovo (danoprevir), which is approved in China, for treating viral hepatitis C.
6. Eli Lilly and Company’s completed $8-billion acquisition of Loxo Oncology. Lilly strengthened its position in oncology with its $8-billion acquisition of Loxo Oncology, a Stamford, Connecticut-based biopharmaceutical company, in a deal completed in February 2019. Loxo Oncology is focused on the development and commercialization of medicines for patients with genomically defined cancers.
With the acquisition, Lilly gains Loxo’s Vitrakvi (larotrectinib), a treatment for adult and pediatric patients whose cancers have a specific genetic feature (biomarker). The US Food and Drug Administration approved the drug in November 2018, marking at that time, only the second time that the FDA approved a cancer treatment based on a common biomarker across different types of tumors rather than the location in the body where the tumor originated. The FDA noted that the approval marks a new paradigm in the development of cancer drugs that are “tissue agnostic.” Vitrakvi is indicated for the treatment of adult and pediatric patients with solid tumors that have a neurotrophic receptor tyrosine kinase (NTRK) gene fusion without a known acquired resistance mutation, are metastatic or where surgical resection is likely to result in severe morbidity and have no satisfactory treatment.
Other key drug candidates from Loxo include LOXO-292, an oral and selective investigational new drug in clinical development for the treatment of patients with cancers that harbor abnormalities in the rearranged-during-transfection (RET) kinase. RET fusions and mutations occur across multiple tumor types with varying frequency. LOXO-292 has been granted breakthrough therapy designation by the US Food and Drug Administration for three indications and could launch as early as 2020, according to information from the companies at the time of the announced acquisition in January 2019.
7 and 8. Novartis’ spin-off of eye-care device business Alcon and $5.3-billion deal for Takeda’s eye-care drug Xiidra. In a move to further focus on its core prescription-drug business, Novartis completed the spin-off of its eye-care device business, Alcon, in April (2019). Novartis announced plans to spin off Alcon last year (June 2018) following a strategic review of the business that it had initiated in 2017.
Alcon, which provides eye-care products to the surgical and vision-care markets, had $7.1 billion in sales in 2018. With the spin-off, Alcon is now a separately traded public company on the SIX Swiss Exchange and New York Stock Exchange.
Although exiting the eye-care device sector with the spin-off of Alcon, Novartis kept its ophthalmology pharmaceuticals business, which includes both prescription and over-the-counter products. To further cement its position in that market, Novartis made another deal that makes our Top 10 deals thus far in 2019: its $5.3-billion deal for Takeda’s eye-care drug, Xiidra. Novartis beefed up its prescription eye-care product portfolio by completing is acquisition of Takeda’s Xiidra (lifitegrast ophthalmic solution), a prescription drug for treating dry eye, in a $5.3-billion deal that included $3.4 billion upfront and up to $1.9 billion in potential milestone payments. Novartis had announced the acquisition earlier this year (May 2019).
Xiidra, which has an anti-inflammatory mechanism of action, is approved to treat the signs and symptoms of dry-eye disease in multiple markets, including the US, Canada, and Australia. It is under regulatory review in a number of additional markets. Novartis plans to integrate Xiidra into its pharmaceuticals portfolio. Novartis says that the additional commercial experiences established with Xiidra is expected to better position the company for its front-of-the-eye pipeline products currently in development.
9. GlaxoSmithKline’s completed $5.1-billion acquisition of Tesaro. GlaxoSmithKline (GSK) made our Top 10 list with its $5.1-billion acquisition of Tesaro, an oncology-focused company based in Waltham, Massachusetts. The deal, which was announced in December 2018, was completed in January 2019.
Tesaro is a commercial-stage biopharmaceutical company, with a marketed product, Zejula (niraparib), an oral poly ADP ribose polymerase (PARP) inhibitor, which is approved for use in ovarian cancer. Zejula is approved in the US and Europe as a treatment for adult patients with recurrent ovarian cancer who are in response to platinum-based chemotherapy, regardless of BRCA mutation or biomarker status. The drug is slated by some analysts as a potential blockbuster drug. GSK says it believes that PARP inhibitors offer “significant opportunities” for use in the treatment of multiple cancer types. In addition to ovarian cancer, Zejula is being investigated for use as a possible treatment in lung, breast and prostate cancer, both as a monotherapy and in combination with other medicines, including with Tesaro’s own anti-PD-1 antibody, dostarlimab.
10. Roche’s pending $4.3-billion acquisition of Spark Therapeutics. Roche is seeking to strengthen its position in the niche area of gene therapy with its pending acquisition of Spark Therapeutics, a commercial gene-therapy company based in Philadelphia. Spark’s commercial product is Luxturna (voretigene neparvovec-rzyl), a one-time gene-therapy product indicated for treating biallelic RPE65 mutation-associated retinal dystrophy, a rare form of inherited vision loss. The drug was approved by the US Food and Drug Administration in 2017 and is currently marketed in the US. The European Commission granted marketing authorization in 2018. Spark Therapeutics’ lead clinical asset is SPK-8011, a gene therapy for the treatment of hemophilia A, expected to start Phase III development in 2019. Spark Therapeutics also has other assets in development for hemophilia B, Pompe disease, Huntington’s disease, and Stargardt disease. In addition to Spark’s products, Roche will be gaining a gene-therapy manufacturing facility with the acquisition. Spark’s Luxturna is manufactured at the company’s manufacturing facility in Philadelphia.
The companies announced the merger in February 2019 and expect the deal to close later in 2019 although earlier this month (July 2019), they have amended their merger agreement to allow for a potential closing until April 30, 2020. Last month (June 2019), the companies received a request for additional information from the US Federal Trade Commission (FTC) on the acquisition of Spark, and the UK Competition and Markets Authority opened an investigation to evaluate whether it has jurisdictional authority to review the transaction.
Almost making the list
Almost making the Top 10 deals thus far in 2019 is Merck & Co’s pending acquisition of Peleton Therapeutics, a clinical-stage biopharmaceutical company in a deal worth up to $2.2 billion ($1.05 billion upfront plus a further $1.15 billion contingent upon successful achievement of future regulatory and sales milestones for certain candidates). The deal was announced in May (2019) and is expected to close in the third quarter of 2019.
Peleton is focused on the development of small-molecule therapeutic candidates targeting hypoxia-inducible factor-2α (HIF-2α) for the treatment of patients with cancer and other non-oncology diseases. Peleton’s lead candidate is PT2977, an oral HIF-2α inhibitor in late-stage development for renal cell carcinoma. PT2977 is currently being evaluated in Phase II clinical trials.