Partnership and licensing deal volume (199) and their potential values, totaling more than $19 billion, in the third quarter were about the same as those recorded in the second quarter, providing further evidence that the biopharma sector has not lost its appetite for dealmaking and those transactions are maintaining their torrid pace to eclipse the number and volume totals racked up last year. (See Biopharma Deals 2016, below.)
In fact, according to data compiled by BioWorld, partnering deal flow at 599 is tracking 15 percent ahead of the number of deals inked at this time last year and is poised to overtake the 706 collaborative deals signed in all of 2015.
In terms of the total biodollars associated with the deals that revealed financial terms, current 2016 transactions, including up-front payments and potential downstream milestones, have generated more dollars year-to-date – 27 percent over the 2015 total and 126 percent over the 2014 total – reflecting the price being agreed upon to gain access to a partner’s assets is increasing, averaging just over $100 million per deal. (See Biopharma Deals: January-September, below.)
Top deal in the third quarter went to Regeneron Pharmaceuticals Inc’s partnership with Teva Pharmaceutical Industries Ltd., which becomes the company’s latest collaborator in a global deal on lead pain asset fasinumab, a nerve growth factor antibody in phase III development for osteoarthritis and in phase II development to treat chronic low back pain. Teva, of Petach Tikva. Israel, agreed to pay $250 million up front, and Regeneron is eligible to receive up to $460 million in development and regulatory milestones, and is eligible for additional sales milestone payments of up to $1.9 billion. (See BioWorld Today, Sept. 21, 2016.)
The companies plan to share equally the remaining development costs for fasinumab, estimated to be approximately $1 billion. On the revenue side, the U.S. portion of the deal is structured as a traditional 50/50 profit-sharing agreement, according to Michael Aberman, Regeneron’s senior vice president of strategy. Ex-U.S., Regeneron will manufacture and supply product in a purchase price arrangement that also will be calculated to include a “significant” share of profits.
Fierce competition for I-O assets
Jounce Therapeutics Inc. received a $225 million up-front payment and a $36 million equity investment as part of its five-candidate immuno-oncology (I-O) collaboration with Celgene Corp. The deal includes Jounce’s lead candidate, JTX-2011, an inducible T-cell co-stimulator, and as many as four early stage immunotherapies targeting B cells, T regulatory cells and tumor-associated macrophages. (See BioWorld Today, July 22, 2016.)
In total, the deal promises up to $2.3 billion in potential regulatory, development and sales milestones across all programs reaching commercialization, plus potential tiered royalties on ex-U.S. sales. Celgene also gains an option to equally share a checkpoint I-O program, a factor that could come into play as the partners explore both monotherapy and combination approaches.
Summit, N.J.-based Celgene will have exclusive ex-U.S. commercialization rights for all of the covered programs, though Jounce is eligible to receive a royalty on any resulting ex-U.S. sales. Celgene and Jounce will equally share profits globally for the checkpoint program.
That deal is ranked third in terms of total dollars and stands in the fifth spot for the amount of up-front money. (See Top 2016 Biopharma deals in Q1 to Q3 by milestone money and up-front money, below.)
It also represents another good example of the competitive land grab taking place for assets relating to cancer, particularly immuno-oncology, which is being waged in the sector. Year-to-date, 32 percent of the collaborations are focused on the development of oncology-based therapeutics. Those transactions represent 45 percent of the total deal values. (See Number of Biopharma 2016 Deals by Therapeutic Focus: Q1 to Q3, and Value of Biopharma 2016 Deals by Therapeutic Focus: Q1 to Q3, below.)
Another related transaction at the tail end of the quarter involved Medigene AG, which signed an alliance with Bluebird Bio Inc. to develop T-cell receptor (TCR)-based immunotherapies. The company is getting $15 million up front plus more than $1 billion in potential milestone payments covering preclinical and clinical development, regulatory approval and product sales. The deal covers four TCR-based therapies across several undisclosed cancer indications. Medigene will also receive research funding over the three-to-four year term of its active R&D collaboration with Bluebird Bio and tiered royalties on eventual sales, ranging from single to double digits. (See BioWorld Today, Sept. 30, 2016.)
Therapies targeting the central nervous system have also attracted a significant number of partnership deals this year, with 68 inked so far representing transaction values of $6.4 billion. Among them was the Q3 deal involving neurodegenerative disease startup Denali Therapeutics Inc. and its agreement with bispecific antibody specialist F-star Ltd., which will use its bispecific antibody platform to develop technology enabling the delivery of therapeutics across the blood-brain barrier.
Denali will pay $6 million up front and has the option to acquire exclusive rights to the technology for a total of $450 million, provided it does so before starting phase I development of any products that arise as a result. (See BioWorld Today, Aug. 26, 2016.)
The South San Francisco-based company can also choose to license a number of bispecific antibodies generated by F-star in return for license fees, development, regulatory and commercial milestones payments with a potential aggregate value of $1 billion plus royalties on sales.
Mergers and Acquisitions hold steady
The number of completed mergers and acquisitions in the biopharma industry in the third quarter was 36 with 22 disclosing financial details, which was two more than the number of M&As completed for the same period last year, again with 22 reporting the financial terms of their deals.
Total deal value was approximately $60 billion, 44 percent higher than the nearly $42 billion total deal value in the same period of 2015.
Boosting the total in the quarter were four multibillion-dollar deals, including Pfizer Inc.’s $14 billion buyout of Medivation Inc. (See Biopharma M&As $1B-plus: Q1 to Q3 2016, by value, below.)
That amount was good enough to beat out other offers for Medivation, including Paris-based Sanofi SA. The prize asset was the company’s androgen receptor inhibitor Xtandi (enzalutamide) for metastatic, castration-resistant prostate cancer that has spread or recurred, even with medical or surgical therapy to block testosterone. (See BioWorld Today, Aug. 23, 2016.)
In the period, Allergan plc divested its global generic business to Teva Pharmaceuticals Industries Ltd. for $33.4 billion in cash and 100.3 million shares of Teva stock valued at $5.4 billion; and Berne, Switzerland-based Galenica Group shelled out $1.5 billion ($32 per share in cash) for Relypsa Inc., of Redwood City, Calif., gaining complete ownership of potassium binder Veltassa (patiromer) for hyperkalemia. Vifor already holds rights to Veltassa outside the U.S. and Japan in a deal struck about a year ago. (See BioWorld Today, July 22, 2016.)
The M&A deal total at 110 is running in lockstep with the 109 completed in 2015. However, the total raised is heavily skewed toward the 2015 totals, with almost $200 billion in transaction values last year compared to $127 billion so far this year. The difference is due to a whopping $70 billion takeover of Allergan Inc. by Actavis plc, which closed early in 2015.
Although M&A activity has remained steady year-over-year in the biopharmaceuticals sector of the health care industry, Mergermarket, in its own just-released Global Pharma, Medical & Biotech (PMB) Q1-Q3 2016 roundup report, found that PMB experienced a decline in M&A activity of 10.2 percent by value compared to the same period in 2015 ($182.4 billion, 716 deals). So far the PMB sector recorded a total deal value of $163.8 billion across 631 deals, and accounted for 12.3 percent of global M&A value.
PMB activity in the U.S. accounted for 66.8 percent of global PMB value, with 241 deals worth $109.3 billion. This, the report found, was a significant slowdown in the first half of the year, falling 23.6 percent compared to $143 billion from 287 deals in the same period last year. The top two U.S. transactions involved the $32 billion takeover of Baxalta Inc. by Shire plc. and the Abbott Labs $29.9 billion bid for St. Jude Medical.
The Asia-Pacific region accounted for only 6.5 percent of total PMB value globally, with 110 deals valued at $10.6 billion.
Despite the quarter-on-quarter downward trend, the year-to-date activity in the PMB sector remained robust with 1,033 deals completed representing approximately $229 billion in 2016. Although deal value dipped 31.8 percent compared to the record $335 billion in value last year, overall, the report said this year’s activity was the third-highest by both deal value and deal count since 2001.
Going forward it is predicted that the biopharma sector will see a few more high-profile M&A transactions before the year is done. Some analysts, however, are suggesting we have reached a point where deal fatigue is beginning to set in and that factor could slow transactions dramatically.
The impact of M&A transactions on the sector will be one of the issues to be discussed at this week’s BIO Investor Forum in San Francisco, and we will be reporting on what transpires at the meeting in next week’s issue.