Seeking to accelerate the company's long-term growth through an expansion of its rare disease pipeline, Horizon Therapeutics plc said Feb. 1 it will buy Viela Bio Inc. for $3.05 billion, or $53 per share (NASDAQ:VIE). Once closed, the deal would add a new commercial-stage asset, Uplizna (inebilizumab), to Horizon's portfolio alongside its current lead products, Tepezza (teprotumumab) for the treatment of thyroid eye disease and Krystexxa (pegloticase) for uncontrolled gout.
Dublin-based Horizon, which had $2.08 billion in cash at the end of 2020, borrowed $1.3 billion to help finance the transaction. Astrazeneca plc also enabled the deal by agreeing to divest its 26.7% share in Viela Bio for a profit of between $760 million and $780 million. Shares of Horizon (NASDAQ:HZNP), which initially dipped on the news, closed 6.3% higher at $77.04 on Monday.
The transaction was unanimously approved by the boards of both companies.
In addition to Uplizna, an FDA-approved treatment of neuromyelitis optica spectrum disorder (NMOSD), Horizon's acquisition of Viela brings it nine other development programs. They are primarily focused on autoimmune and severe inflammatory diseases. They include phase III trials of Uplizna in myasthenia gravis and IgG4-related diseases; mid-stage programs for VIB-4920 (dazodalibep) in Sjögren’s syndrome, kidney transplant rejection and rheumatoid arthritis; and a soon-to start phase II evaluation of VIB-7734 (daxdilimab) in systemic lupus erythematosus.
"Each of these molecules target central pathways that are implicated in a wide range of autoimmune diseases, providing many avenues for potential growth," said Tim Walbert, Horizon's chairman, president and CEO. "We believe that three currently approved or clinical-stage Viela candidates each represents a more than $1 billion annual net sales opportunity.”
It will, of course, take time and label expansions to realize such projections. During the most recently reported quarter, still early in its launch, Uplinza generated just $2.3 million in revenue. A Cortellis consensus forecast suggests peak sales may reach $132 million by 2026. Furthermore, as it works to ramp up sales of the drug, Horizon will face competition in NMOSD from both the complement inhibitor Soliris (eculizumab , Alexion Pharmaceuticals Inc.) and Ensprying (satralizumab, Chugai Pharmaceuticals Co. Ltd.).
Horizon's team, however, may be seeing beyond what's immediately in view, Cowen analyst Ken Cacciatore wrote. "Given that Horizon has been able to identify underappreciated company assets," in Krystexxa from Crealta Pharmaceuticals Inc. and River Vision Development Corp.'s Tepezza, "and leverage their commercial expertise to maximize those products' value, we believe this should occur with Uplizna."
In addition to the phase III programs, the B-cell-depleting CD19-specific MAb Uplinza is part of a phase II trial for kidney transplant rejection, though it's now paused due to COVID-19.
Building R&D capacity, tackling manufacturing woes
Formed in December 2017 as a spinout of Astrazeneca plc's Medimmune arm, Viela started out with three clinical and three preclinical assets. It banked a $250 million series A financing, followed by a $75 million series B round before going public in a $172.6 million IPO in October 2019.
In addition to expanding Horizon’s portfolio, buying Viela will also enhance its early-stage translational capabilities and development expertise in autoimmune and severe inflammatory diseases, Walbert said. Now, the company plans to “significantly increase our R&D investment in 2021 into low double digits as a percent of net sales, approaching levels of our profitable biotech peers," he said. With about 60 of Viela's 170 employees engaged in R&D today, the combination would "meaningfully augment our current R&D team of approximately 150 employees," he added.
The acquisition is Horizon's first since April 2020, when it acquired a phase IIb-ready candidate HZN-825 through its purchase of Curzion Pharmaceuticals Inc. The company plans to initiate two pivotal trials of the lysophosphatidic acid 1 receptor antagonist by the middle of this year, one for a rare form of scleroderma and one for idiopathic pulmonary fibrosis.
Despite the focus on the future, the Viela deal arrives in the midst of a challenging present for Horizon, in which, due to government-mandated COVID-19 vaccine production orders, it's facing a supply disruption of its thyroid eye disease product, Tepezza, that it expects could last through the first quarter of this year. Addressing the issue ahead of other matter Monday, Walbert said the company has made "significant progress" on the issue.
Cowen's Cacciatore agreed, writing that "nice progress has been made to increase the capacity of their current manufacturing slots.” Completed lots of Tepezza pending FDA approval and the manufacturing capacity currently planned at Catalent, may provide sufficient supply to serve existing patients on therapy and even allow for the initiation of treatment for new patients, the company said Monday.