Pfizer Inc.'s $5.2 billion takeover of Anacor Pharmaceuticals Inc. to grab crisaborole for atopic dermatitis (AD, or eczema) didn't knock anyone out of their chairs but triggered some chin-scratching speculation about whether the merger-and-acquisition (M&A) waters have begun to roil again.

Pharma's still in need of pipeline backfill, and sellers may have begun to dream less big, as shown by the OK from Anacor, of Palo Alto, Calif., to New York-based Pfizer Inc.'s $99.25-per-share takeout price, a 55 percent premium to the most recent pre-deal closing price of $65 but nowhere near the company's $156 peak. That high was reached last summer before the slide began for just about everybody in the sector. Since July 1, 2015, the Nasdaq Biotech Index is down 29 percent. (See BioWorld Today, May 17, 2016.)

"Fiscal years 2014 and 2015 likely marked the peak of the latest M&A cycle that included nearly $300 billion in completed acquisitions – which notably excludes Pfizer's recently canceled $160 billion acquisition of Allergan plc," Jefferies analyst David Steinberg wrote in a research report. "This explosion of deal-making was fueled by historically low interest rates, tax inversions and investors rewarding acquirers for making acquisitions. While inversions are now seemingly dead, debt remains cheap and larger players (and their investors) remain eager to identify attractive assets that could bolster their portfolios/growth profiles. As such, while we believe 'mega-mergers' are likely off the table for now, we could envision an acceleration in small/mid-sized tuck-ins where 'cash rich/product poor' acquirers seek out certain higher quality specialty pharma assets like Anacor's. If this comes to pass, it could markedly improve sentiment in a category that is now trading at historic lows."

As if to give more proof, earlier this week Dublin-based Jazz Pharmaceuticals plc made known its plan for the $1.5 billion buyout of Celator Pharmaceuticals Inc., of Ewing, N.J., to take ownership of Vyxeos for high-risk (secondary) acute myeloid leukemia. Among Jazz's marketed products is Erwinaze (asparaginase) for acute lymphoblastic leukemia. In the Celator deal, structured as a tender offer and second-step merger, Jazz, agreed to pay $30.25 per share, a 72 percent premium to Celator's most recent closing price in order to claim Vyxeos, a liposomal form of cytarabine and daunorubicin that emerged from the latter's Combiplex delivery platform based on liposomes and nanoparticles. A new drug application (NDA) for breakthrough-designated, fast-tracked Vyxeos is expected in the next quarter, with marketing authorization in Europe to be sought in 2017. (See BioWorld Today, June 1, 2016.)

It wasn't a merger, but the day after its deal with Pfizer went kaput, Dublin-based Allergan made public a $3.3 billion collaboration in Alzheimer's disease and other neurological disorders with G protein-coupled receptor (GPCR) specialist Heptares Therapeutics, of Welwyn Garden City, U.K. Allergan gained exclusive rights to a number of selective muscarinic receptor agonists discovered by Heptares, amongst which are two phase I programs, in exchange for $125 million up front, with development milestones of up to $665 million payable up to the launch of the first of three products, followed by $2.5 billion in sales milestones.

Leerink analyst Seamus Fernandez opined that Pfizer's pipeline "has upside optionality beyond 2020, but we do not expect any major near-term launches" from the company's internal lineup. "As a first-in-class topical phosphodiesterase type 4 inhibitor for AD, we fully expect crisaborole to be successful, but at first glance, Pfizer's $2 billion peak sales estimate looks a bit high," he wrote in a research report. "We believe crisaborole could be a $1 billion to $1.5 billion opportunity in AD, but it could be $2 billion if [research in] mild-moderate psoriasis succeeds. We believe Pfizer has the need, and wherewithal, to pursue further M&A to improve the near- and medium-term growth outlook."

Jefferies' Steinberg likes the dermatology space overall for M&A and noted that Anacor's eczema buyout represents the 20th such transaction in the skin sector in the past six years. "We've consistently argued that dermatology is one of the most attractive subsectors in specialty pharma, buttressed by attractive fundamentals including 1) cash-pay dynamics in aesthetics, 2) relatively lower-risk development programs, 3) attractive 'white spaces' where a lack of innovation presents opportunity, and 4) lean, highly leverage-able commercialization models. That said, we believe some observers had lost sight of these very positive sector dynamics in light of Valeant Pharmaceuticals Inc.'s woes, namely pricing and specialty pharmacy distribution controversies specifically tied to the dermatology category." Laval, Quebec-based Valeant has been beset by scrutiny of its auditing and costs of drugs. (See BioWorld Today, March 22, 2016.)

Others in dermatology that look like solid M&A candidates to Steinberg include Aclaris Therapeutics Inc., Dermira Inc., Foamix Pharmaceuticals Ltd. and Revance Therapeutics Inc. Following up the Anacor transaction in the same week, though, was a deal not in skin but in neurology – also hot, as the Allergan/Heptares tie-up showed – when Arbor Pharmaceuticals LLC, of Atlanta, moved to get ownership of Redwood City, Calif.-based Xenoport Inc. for $467 million in cash, adding the restless leg and postherpetic neuralgia drug Horizant (gabapentin enacarbil) to its portfolio.

The deal also presumably includes up to $440 million in potential payments from Dr. Reddy's Laboratories Ltd., of Hyderabad, India, should the psoriasis drug it licensed from Xenoport, XP23829, meet certain regulatory and commercial milestones under a deal that the pair struck in March after Xenoport decided to focus its energies exclusively on Horizant. (See BioWorld Today, March 29, 2016, and May 24, 2016.)

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