Healthcare Newsletter August 2020

While the economic and public health impact of the COVID-19 continues, the scientific community and pharma industry have been at the forefront of global response measures.  M&A momentum continues to be subdued with cash conservation focus being pervasive across companies. However, we are encouraged that the deal making momentum we had discussed in our newsletter last month continues unabated.  While big acquisitions are elusive, portfolio enhancing licensing and strategic partnerships continue to be forged.  Private Equity funds are also actively deploying dry powder capitalizing on tempered valuations and addressing the paramount need for cash. We discuss below a round-up on significant developments across big ticket M&A, licensing and PE investments: 

Lean yet significant M&A activity across medtech, digital health & pharma

Lean yet significant M&A activity across medtech, digital health & pharma

Deal momentum this month rests on the lofty shoulder of the Siemens Healthineers – Varian transaction in the medical device segment.   Siemens Healthineers has announced a massive USD 16.4 Billion acquisition of Varian Medical Systems in a deal that spells further consolidation in radiation therapy. Radiation therapy hardware, like the linear accelerator (LINAC), forms a significant part of Varian’s business, along with a suite of software solutions in artificial intelligence, data analysis, and machine learning for oncology.  Siemens which has a range of diagnostic and imaging offerings for oncology gets to establish a comprehensive portfolio of offerings expanding across the entire continuum of cancer care from diagnosis, imaging to treatment.  With this deal closed, Siemens positions itself as an end-to-end oncology solutions provider.  It also opens opportunities for Siemens to target emerging markets like China and India, where radiation therapy is currently under penetrated and capacity is expected to leapfrog during the coming decade.  With the level of consolidation this landscape reshaping deal will imply in the oncology therapy market, the deal might need to cross the hurdle of clearance from the competition commissions. 

With impetus from COVID-19 led changes in healthcare, August 2020 is also had what could be touted as the biggest telehealth deal, a USD 18.5 billion merger between US Telehealth giant Teladoc and digital chronic disease management company Livongo. The value of the combined entity under the name of Teladoc at USD 37 Billion will create a formidable force in telemedicine in the USA. Strategically timed during the pandemic when the use of virtual healthcare platforms has exploded, the merger brings the companies’ core strengths together– Teladoc’s consumer base in the USA and Livongo’s long-standing expertise in chronic disease management and offering personalized preventive care solutions. This opens a treasure trove of health data that can be integrated with the EHRs to potentially deliver data-driven insights for preventive care for chronic diseases. The current pandemic has also triggered both patients and healthcare providers to re-assess prevention and management strategies for chronic diseases, and Teladoc’s combined offering pitches it as a strong player in routine healthcare management.

While pharma companies have been reticent to forger larger M&A deals, overall momentum  is sustained by the acquisition of Momenta Pharmaceuticals by Johnson & Johnson. In the recently announced buy-out at a deal valued at USD 6.5 Billion, J&J will receive exclusive global rights for Momenta’s pipeline including Nipocalimab, an anti-FcRn antibody that is in clinical development for three autoimmune conditions namely Myasthenia Gravis, Warm Autoimmune Haemolytic Anaemia (wAIHA) and Haemolytic Disease of Foetus and Newborn (HDFN). This acquisition that powers J&J autoimmune pipeline has been discussed further in our Pharm Forward update here.

Another significant pharma deal this month in immunology is Sanofi acquiring remaining stake in Principia Biopharma for USD 3.7 Billion.  Principia, a late-stage biopharmaceutical company focuses on developing novel therapies for immune-related disorders. Sanofi has forged an exclusive global license and complete ownership for Principia’s lead candidate, SAR442168, currently undergoing Phase III clinical trials to treat Primary Progressive Multiple Sclerosis (PPMS). Utilizing Principia’s BTK inhibitor franchise, which is based on its proprietary Tailored Covalency platform, Sanofi aims to expand its offerings in therapies targeting autoimmune disorders. More information on the deal is in our Pharm Forward update.

Some of the other noteworthy deals during the month include:

Companies Involved in transaction

Indication/ Therapeutic Area

Deal Details

Bayer and Kandy Therapeutics

Menopause-related hot flashes

USD 425 Million

Bionano Genomics and Lineagen Inc

Diagnostics for paediatric neurodevelopmental disorders

USD 9.6 Million

Kintara Therapeutics and Adgero Biopharmaceuticals

Oncology candidates: drug-resistant solid tumours

Deal value not disclosed

Medtronics and Companion Medical

Smart insulin pen system

Deal value not disclosed (More details available here)


Strategic partnerships and licensing – High continuing momentum

Strategic partnerships and licensing – High continuing momentum

In our last month’s newsletter we pointed to leaner M&A appetite in the current COVID-19 and pivoting of deal structures towards licensing vs outright acquisition.  The trend continues.  While industry has been largely reticent on big acquisitions, licensing momentum continues to be high.  We are encouraged that pipeline nurturing focus has been compromised and is co-existing with cash conversation and COVID led tighter purse strings.  Deal activity spans immunology, neurology and biosimilars/generics. 

Biohaven Pharmaceuticals has announced a partnership with Royalty Pharma to develop and commercialize small molecule Calcitonin Gene-Related Peptide (CGRP) antagonist platform indicated to treat migraines. This collaboration will allow Royalty Pharma to broaden the CGRP franchise into migraine adjacencies, non-migraine indications, and new formulations. Formerly known as vazegepant, the program includes an intranasal and oral pathway for the prevention of migraine and non-migraine indications. Raising USD 450 Million, Biohaven Pharmaceuticals will also receive additional funding to support the commercial launch of Nurtec ODT, which had received USFDA approval in February 2020 and the completion of the clinical development of their investigational drug zavegepant. More details of the deal are in our Pharm Forward update. Another partnership in the CNS domain is Biogen Inc. and Denali Therapeutics Inc. collaborating to co-develop and co-commercialize Denali’s Parkinson’s drug, a leucine-rich repeat kinase 2 (LRRK2) inhibitor. In the deal worth more than USD 1 Billion, in addition to this first in class oral drug, Biogen also gets opt in rights to two additional programs developed using Denali’s blood-brain barrier (BBB) crossing Transport Vehicle (TV) technology platform. More details of the deal are in our Pharm Forward update here.

In the field of onco-immunology, larger companies, including Bristol-Myers Squibb (BMS), Teva, and Celleron have garnered a lot of attention. As one of the most sought after segment, onco-immunotherapies, attracted partnerships for early-stage assets too. Recently on Aug 17, BMS has inked a deal with Dragonfly Therapeutics for an interleukin-12 based immunotherapy program for the treatment of advanced solid tumours. The licensing agreement valued at USD 475 Million grants BMS an exclusive worldwide license to commercialize any drug developed under this collaboration. Harnessing the unique portfolio of fusion protein-based immune-oncology platforms offered by Dragonfly, BMS will strengthen its presence in the oncology market. The centrepiece of the deal is DF6002, a long-lasting monovalent IL-12 Fc fusion protein indicated for the treatment of patients with advanced solid tumours undergoing a phase I/II study initiated earlier in July this year. Details of the deal are in our Pharm Forward update here.

A case of a smaller biotech breathing life into an asset with potential to be resurrected, Celleron Therapeutics in-licensed from Roche worldwide rights for Emactuzumab, a monoclonal antibody targeting the colony-stimulating factor 1 (CSF-1R). Emactuzumab has demonstrated efficacy for the treatment of diffuse Tenosynovial Giant Cell Tumour (TGCT), a rare disease with proliferation of macrophages in synovial tissue in joints. Although the antibody was developed by Roche in 2011, the program was shelved in 2018, citing business decisions and emphasizing that there were no safety or efficacy concerns. This agreement will allow Celleron to strengthen its portfolio of oncology drugs targeting conditions where there’s a significant unmet need for long-term disease control. More details of deal are in our Pharm Forward update here.

In biosimilars where the US commercial opportunity is now more tangible, Teva and Alvotech have forged a marketing partnership. The deal gives Teva exclusive commercialization rights for five undisclosed biosimilars from Alvotech’s pipeline in the US market. This partnership will mark a significant development for Teva, powering the generic major with a strong foothold in the rapidly evolving US market for biosimilars. With Teva’s foray into the biosimilars market in 2019 with its partnership with Celltrion for marketing its Truxima (rituximab) and expanding in 2020 Herzuma (trastuzumab), we anticipate that the alliance will increase pricing pressure and competitive intensity in US biosimilars. More details of the deal are in our Pharm Forward update here.

Some of the other notable deals this month include:

Companies Involved in transaction

Indication/ Therapeutic Area

Deal Details

ImmVira and Shanghai Pharma 

Onco-immunotherapy

RMB1.15 Billion

Regeneron and BioNTech 

Melanoma

Deal value not disclosed

Celltrion and Intract Pharma

Inflammatory Bowel Disease

Deal value not disclosed

Takeda-Teva joint venture and Nichi Iko Pharmaceutical Ltd

Generics

Deal value not disclosed

We expect the licensing momentum to continue over the next few months and co-exist with the subdued M&A appetite as well as transactions led by debt / portfolio rationalization intent, such as Takeda-Teva divesting certain generics to Nichi Iko.


PE deal making spree bridging leaner appetite in pharma companies

PE deal making spree bridging leaner appetite in pharma companies

With leaner industry appetite for outright acquisitions and tempered valuations, private equity funds have been on an active deal making spree. The trend transcends geographic borders.

Emerging Markets: In July 2020, PE firm KKR added to the deal momentum in emerging markets with the USD 400 Million acquisition of a controlling stake in Indian company J.B. Chemicals & Pharmaceuticals. Another India deal was Advent International acquiring a controlling stake in RA Chem Pharma Limited, a vertically integrated pharmaceutical company from Micro Labs Limited. TA Chem’s core focus area is API manufacturing. However, it has forward integrated into Pellets, Formulations, and Clinical Research to provide end-to-end solutions to its customers. While the financial details of the transaction remain undisclosed, the PE firm plans to scale RA Chem’s operations globally both organically and inorganically.

US: Blackstone has emerged as one of the most active life-sciences focused deal makers in the West.  In July, Blackstone chartered new territory with its investment of USD 337 Million in Medtronic’s research programs focused on diabetes.  A landmark investment in research, especially in the segment of medical devices. Funding from Blackstone group will be targeted towards developing innovative products for the management of patients with Type 1 Diabetes, more specifically, the Continuous Glucose Monitoring (CGM) product pipeline programs. More details on the deal are covered in our Pharm Forward update here. This month, Blackstone entered into a strategic collaboration with Alnylam under which Blackstone will provide USD 150 Million R&D financing to Alnylam, which forms a component of the USD 2 Billion strategic financing announced in April this year. Alnylam has a portfolio of innovative RNA interference (RNAi) based therapeutics targeting genetic, cardio-metabolic, infectious, CNS, and ocular diseases. The latest financing round focuses on the advancement of Alnylam’s cardiometabolic disease programs vutrisiran and ALN-AGT. The fund will support the ongoing HELIOS-B Phase 3 study of vutrisiran in ATTR amyloidosis patients with cardiomyopathy, and up to USD 80 Million of the fund will be invested to support Phase 2 and Phase 3 development of ALN-AGT, in development for the treatment of hypertension.

Japan: Further East, Blackstone has also entered into a definitive agreement to acquire Takeda Consumer Healthcare Company, a subsidiary of Takeda Pharmaceuticals with consumer care and OTC medicines for the Japanese Market. The deal valued at USD 2.3 Billion, forms a part of Takeda’s broader divestment strategy for portfolio restructuring, shifting the focus to five key business areas in branded prescription medicines. Oscar A-Co KK, a company controlled by funds managed by The Blackstone Group Inc. and its affiliates will acquire the company on behalf of Blackstone with an exit strategy to take the company public in the next five years after strengthening its business in Asia through its networks in Taiwan, China, and Thailand. More details on the deal are in our Pharm Forward update here.

 


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