Biopharma report 2023: M&A upswing
Blockbuster deals are on the rise as drug manufacturers navigate through patent cliffs, pricing pressures, and evolving regulations while M&A activity remains an integral part of the strategic landscape.
By Andrew Humphreys | [email protected]
Mergers and acquisitions (M&A) activity within the biopharmaceutical arena got off to a strong beginning during 2023. From Pfizer’s acquisition of Seagen to Merck’s purchase of Prometheus Biosciences, these blockbuster pacts highlight a focus on leading industry players bolstering core assets and expanding capabilities in specialized fields including oncology, immunology, and gene therapy. Biopharma giants armed with cash are finding new targets to restock their pipelines.
The largest 2023 pharma transaction to date is Pfizer’s acquisition of Seattle-based biotechnology company Seagen for $43 billion, significantly bolstering Pfizer’s oncology capabilities. By combining Seagen’s antibody-drug conjugate technology with Pfizer’s own expertise, the transaction is anticipated to strengthen Pfizer’s marketplace position and enhance its ability to develop innovative therapies for many diseases.
Pfizer CEO Dr. Albert Bourla stated, “Together, Pfizer and Seagen seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients … Oncology continues to be the largest growth driver in global medicine, and this acquisition will enhance Pfizer’s position in this important space and contribute meaningfully to the achievement of Pfizer’s near- and long-term financial goals.”
The oncology market has emerged as the largest therapy area by sales, poised to generate $2.2 trillion in sales between 2023 and 2029, according to analysts from GlobalData. “The oncology market is set to experience a 6.8 percent CAGR, propelled by the U.S., which stands as the largest market for oncology drugs. The U.S. is forecast to account for 47 percent of the total forecast sales between 2023 and 2029.”
After deciding not to acquire Seagen during 2022 because the companies reportedly could not agree on a purchase price, Merck agreed to buy San Diego-based Prometheus for $10.8 billion during April 2023, and with it comes a promising late-stage drug candidate against cytokine TL1A, a target associated with both intestinal inflammation and fibrosis. Strengthening its presence in immunology, Merck will pay $200 per share for a biotechnology company that focuses on developing treatments for autoimmune diseases. Prometheus’ anti-TL1A monoclonal antibody PRA023 represents an anticipated blockbuster product being developed for treating ulcerative colitis, Crohn’s disease, and systemic sclerosis-associated interstitial lung disease.
Merck CEO Robert Davis stated, “This transaction adds diversity to our overall portfolio and is an important building block as we strengthen the sustainable innovation engine that will drive our growth well into the next decade.” According to Fierce Biotech analysis, “The length of the growth runway is an important factor for Merck, which looks set to face biosimilar competition to its megablockbuster Keytruda in the U.S. from 2028. If PRA023 delivers on its midphase promise, the drug candidate could soften the blow of the initial biosimilar competition and then provide Merck with a series of new growth opportunities as it works to expand the label.”
Deal or no deal
The U.S. Federal Trade Commission said on May 16 it had filed a lawsuit to prevent Amgen’s acquisition of Horizon Therapeutics in “a rare move to block a large pharmaceutical deal,” per Reuters. In December 2022, the board of directors of Amgen announced an agreement on the terms of a cash offer for Horizon by Pillartree, a newly formed private limited company wholly owned by Amgen. The acquisition values the entire issued and to be issued ordinary share capital of Horizon at $27.8 billion on a fully diluted basis and implies an enterprise value of $28.3 billion.
Company management says the transaction strengthens Amgen’s portfolio of first-in-class/best-in-class innovative therapeutics by adding a complementary portfolio of medicines from Horizon that address the needs of patients suffering from rare diseases. The deal capitalizes on Amgen’s 20-year commercial and medical legacy in inflammation and nephrology and the company’s worldwide scale to enhance the growth potential of Horizon’s portfolio. Additionally, the acquisition uses Amgen’s industry-leading research and development, process development, and global manufacturing expertise in biologic medicines for the benefit of Horizon’s approved medicines and potential new products.
The FTC said it opposed the transaction because of concern that Amgen would leverage the company’s big-selling products to pressure insurance companies and pharmacy benefit managers to give favorable terms for Horizon’s two key medicines – the blockbuster product Tepezza for thyroid eye disease and the gout medication Krystexxa.
“The FTC decision to stop this acquisition marks a change,” noted a Reuters article. “Previously, the agency flagged therapeutic overlaps in the companies and waved the deals through after requiring one of the medicines to be divested.”
Per Reuters, “The FTC has signaled its determination to scrutinize pharma mergers more carefully,” former FTC Chairman William Kovacic said in an email. Kovacic said the commission’s decision to try to block the transaction, rather than pursue a settlement, suggests the FTC does not believe previous settlements adequately fixed the perceived competitive issues.
“In an alarming sign for biopharma M&A scrutiny to come, the FTC argues Amgen could leverage its existing product portfolio to ‘entrench the monopoly positions’ of Horizon meds for thyroid eye disease and chronic gout”, according to a Fierce Pharma analysis.
“The antitrust challenge marks the first time that the FTC has reached beyond specific product overlaps in its reviews and instead focused on companies’ past behaviors around drug pricing. It’s an approach that the agency has threatened to implement since 2021 but has only now reared its teeth. And the FTC isn’t shy about its intentions,” the Fierce Pharma article says.
“Today’s action – the FTC’s first challenge to a pharmaceutical merger in recent memory – sends a clear signal to the market: The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition,” FTC Bureau of Competition Director Holly Vedova said in a statement on May 16.
The FTC lawsuit to block Amgen’s acquisition of Horizon is set for a hearing on Sept. 11. A U.S. District judge said he would likely take about four weeks after the hearing ends to make a ruling.
According to an 8-K filing, the U.S. District Court for the Northern District of Illinois on May 17 granted a stipulated temporary restraining order (the “Initial Stipulated TRO”) filed by Horizon, Amgen and the FTC providing that the two companies would not close the transaction until the earlier of Sept. 15, 2023 or the second business day after the court rules on the commission’s request for a preliminary injunction. On May 24, the court scheduled an evidentiary hearing on the commission’s request for a preliminary injunction beginning on Sept. 11. Based on the court’s schedule, Horizon, Amgen and the FTC then jointly proposed an extension of the Initial Stipulated TRO to the earlier of Oct. 31, or the second business day after the court rules on the commission’s request for a preliminary injunction. The court issued an order on June 2 granting the Revised Stipulated TRO. Amgen management anticipates that the schedule set by the court would allow the acquisition to close by mid-December if the court denies the FTC’s request for a preliminary injunction.
In building a world-class ophthalmology entity, Tokyo-based Astellas Pharma took another step toward to this end after entering into a definitive deal to acquire Parsippany, N.J.-based biopharmaceutical company Iveric Bio for $5.9 billion. Announced on April 29, the companies reached a deal under which Astellas via Berry Merger Sub, a wholly owned subsidiary of Astellas US Holding, agreed to acquire 100 percent of the outstanding shares of Iveric Bio for $40.00 per share in cash for a total equity value of $5.9 billion. Iveric Bio will become an indirectly wholly owned subsidiary of Astellas. The boards of directors of each party have unanimously approved the acquisition.
“The acquisition seems to be the biggest acquisition in the history of Astellas. … Moreover, pure play ophthalmology acquisitions of this size are rare,” says Prashant Khadayate, pharma analyst at GlobalData.
According to Iveric Bio President Pravin U. Dugel, M.D., “The opportunity to create a world-class entity with the ophthalmology expertise and capabilities of Iveric Bio and the global reach and resources of Astellas is unique and has the potential to benefit patients worldwide suffering from blinding retinal diseases, including GA (geographic atrophy).”
Iveric Bio has concentrated on the discovery and development of novel treatments in the area of ophthalmology. The company announced during February 2023 that the U.S. FDA accepted for filing a New Drug Application for ACP for treating GA secondary to age-related macular degeneration (AMD). The NDA was designated priority review with a Prescription Drug User Fee Act goal date of Aug. 19, 2023.
The complement C5 inhibitor avacincaptad pegol (ACP) is an investigational drug for GA secondary to AMD and has significant potential to deliver value to a large and underserved patient base, company management says. ACP met its primary efficacy endpoint (reduction of the rate of GA progression) with statistical significance across two pivotal clinical studies, (GATHER trials) and has received breakthrough therapy designation from the FDA for this indication.
According to GlobalData’s Pharma Intelligence Center, ACP is projected to generate sales of $1.09 billion in 2028. “Roche is the only other big player involved in the development of drugs for GA and its drug is currently in Phase II. Considering the overall competition, Astellas can leverage its commercial strength to easily achieve a leadership position in this area.”
Enhancing position in rare hematology
Swedish Orphan Biovitrum agreed to acquire CTI BioPharma by means of a tender offer on May 10, enhancing Sobi’s position in rare hematology. Sobi entered into an agreement and plan of merger with CTI, a biopharma company focused on blood-related cancers and rare diseases.
Management says the acquisition complements and further bolsters Sobi’s leading hematology franchise by adding Vonjo (pacritinib), a novel oral kinase inhibitor that inhibits JAK2, IRAK1 and ACRV1, while sparing JAK1. The medicine received U.S. accelerated approval during February 2022 for treating adults with intermediate or high-risk primary or secondary (post-polycythemia vera or post-essential thrombocythemia) myelofibrosis with a platelet count below 50 × 109/L.
Highly complementary to Sobi’s existing portfolio, particularly Doptelet, the transaction expands Sobi’s leading position in rare hematology and accelerates access for patients to both therapies around the world.
Vonjo and Doptelet address rare hematological platelet disorders and are prescribed by hemato-oncologists and hematologists. The acquisition accelerates Sobi’s strategy to form a leading franchise in rare hematology.
Management says the acquisition is anticipated to accelerate Sobi’s revenue growth, and to improve margins, adding a commercial-stage asset in the United States, with the potential for further expansion globally.
Sobi announced on May 25 that the company commenced a tender offer through its indirect wholly owned subsidiary Cleopatra to purchase all outstanding shares of common stock of CTI, at a price of $9.10 per share in cash. The total equity value of the agreement and plan of merger with CTI totals $1.7 billion (SEK 17.1 billion).
First-in-class new medicines
The FDA approved GSK’s Arexvy on May 3 as the world’s first respiratory syncytial virus (RSV) vaccine for older adults. According to the company, the ground-breaking approval allows adults aged 60 years and older to be protected from RSV disease for the first time.
Arexvy was given the green light for the prevention of lower respiratory tract disease caused by RSV in individuals 60 years of age and older. This represents the first RSV vaccine for older adults to be approved In any country.
According to GSK Chief Scientific Officer Tony Wood, “Today marks a turning point in our effort to reduce the significant burden of RSV. Arexvy is the first approved RSV vaccine for older adults, expanding GSK’s industry-leading vaccine portfolio, which protects millions of people from infectious diseases each year. Our focus now is to ensure eligible older adults in the U.S. can access the vaccine as quickly as possible and to progress regulatory review in other countries.”
Peter Marks, M.D., Ph.D., director of the FDA’s Center for Biologics Evaluation and Research, stated, “Older adults, in particular those with underlying health conditions, such as heart or lung disease or weakened immune systems, are at high risk for severe disease caused by RSV. Today’s approval of the first RSV vaccine is an important public health achievement to prevent a disease which can be life-threatening and reflects the FDA’s continued commitment to facilitating the development of safe and effective vaccines for use in the United States.”
Pittsburgh-based Krystal Biotech during May was the recipient of U.S. clearance of a revolutionary and redosable gene therapy to treat dystrophic epidermolysis bullosa, both recessive and dominant. DEB is a rare and severe genetic disease causing highly delicate skin prone to painful blistering and tearing even from minor friction or trauma.
Vyjuvek (beremagene geperpavec-svdt) represents the FDA’s first-ever approved redosable gene therapy and is the only U.S.-approved medicine for patients with DEB, additionally known as ‘Butterfly Disease’ (in reference to skin as fragile as a butterfly’s wings). The product is designed to address the genetic root cause of DEB by delivering functional copies of the human COL7A1 gene to provide wound healing and sustained functional COL7 protein expression with redosing.
With this marketing approval, FDA regulators issued Krystal Biotech a Rare Pediatric Disease Priority Review Voucher (PRV), which confers priority review to a subsequent drug application that would not otherwise qualify for priority review. “Today’s landmark approval of Vyjuvek as the first redosable gene therapy ushers in a whole new paradigm to treat genetic diseases and is an important milestone for patients affected by DEB as well as their families and caregivers,” stated Krystal Biotech CEO Krish S. Krishnan.
Immuno-oncology agents to continue transforming cancer treatment landscape
Immuno-oncology (IO) agents have transformed the oncology arena in the past decade, especially immune checkpoint inhibitors (ICIs) in solid tumor settings and chimeric antigen receptor (CAR) T-cells in hematological malignancies, with patients who previously had very limited therapeutic options achieving long-term remissions and even cures. Continued investment into IO R&D in academia and industry will further improve the clinical outlook of oncology patients, according to GlobalData.
The GlobalData report, “Thematic Research: Immuno-Oncology,” explores the very diverse and rich IO pipeline and identifies more than 700 novel agents undergoing clinical development. Cell therapies lead the IO classes with more than 300 agents in clinical development in the 8MMs, of which the majority are CAR-T cell therapies. Checkpoint modulators follow cell therapies with 140-plus agents in the pipeline.
“The greatest investment is in classes of agents with demonstrated efficacy, namely, cell therapies and ICIs,” notes Avigayil Chalk, senior oncology and hematology analyst at GlobalData. “However, pipeline ICIs are facing extreme competition as they enter a heavily crowded treatment landscape, with multiple ICIs having regulatory approval across lines of therapy in a broad range of solid tumor indications. Targeting of a novel checkpoint that improves response rates or enables retreatment of checkpoint-exposed patients are strategies, which may give novel agents a share of this market.”
Chalk continues, “Pipeline cell therapies entering the hematological malignancy landscape will also have to tackle fierce competition, with multiple cell therapies already marketed for the easier-to-target B-cell malignancies. Cell therapies that may successfully compete in the B-cell malignancy setting include those that target novel or multiple receptors/antigens, those with simplified or shortened manufacturing processes, and those that are allogeneic. Cell therapies, including CAR-Ts, CAR-Natural Killer cells (CAR-NK), and stimulated dendritic cells for solid tumor indications are also in development, however, with a lack of suitable targets, and minimal demonstrated efficacy, this is a high-risk, high-reward approach.”
Multi-specific antibodies, of which the majority are bispecific T-cell engagers (BiTEs), represent another IO class that holds very significant potential, with more than 100 such agents in the clinical development phase. There are four marketed BiTEs, three of which have gained regulatory clearance for hematological malignancies and one for uveal melanoma.
According to Chalk, “There is great enthusiasm amongst physicians for the wider application of BiTEs, which could become a significant class in both the hematological and solid tumor settings. BiTEs link endogenous effector T-cells to tumor-expressed antigens, thereby promoting an anti-
tumor immune response. Unlike CAR-T therapies, BiTEs are an “off-the-shelf” product, giving them a significantly simplified manufacturing process, a lower cost, and increased availability to a greater patient population across markets.”
Therapeutic cancer vaccines are a class of IO agents that have historically demonstrated disappointing clinical efficacy, however, in recent years, there has been an increase in the amount of such agents in development, especially those based on mRNA technology.
Chalk says, “Educating a person’s immune system to target rapidly evolving, genetically complex tumors, which still present self-antigens, is a tremendous challenge.”
On the other hand, if an immune response is successfully generated, persisting antibodies and memory cells could provide long-term immunity, thereby preventing disease relapse. During 2022, Moderna’s investigational personalized mRNA cancer vaccine mRNA-4157/V940 provided the first demonstration of efficacy for this therapeutic class, generating much excitement in the oncology space.
“Despite the advances in IO, there are still significant unmet needs in oncology, with the majority of patients diagnosed with advanced disease not achieving long-term remission. The exciting and novel IO pipeline is set to address some of this unmet need, improving the outlook for patients,” Chalk states.
The significance of small molecule medicines
Small molecule drugs are chemically synthesized medicines typically taken orally in the form of a pill or a capsule. These products play essential roles in treating various diseases and are indispensable in providing patients, caregivers, and healthcare providers with the tools necessary to achieve improved health outcomes.
Despite the significant advantages that small molecule medicines offer in the treatment of many illnesses, government price-setting provisions in the Inflation Reduction Act (IRA) could lead to fewer of these medicines being developed for patients. Signed into law on Aug. 16, 2022, the IRA contains several provisions that reform Medicare Part D design and medicine pricing. According to Ernst & Young analysis, for lifesciences companies assessing the implications, there are two key considerations to consider: 1) legal challenges are expected throughout the regulatory process even though the act has been signed into law and 2) the three key drug pricing provisions will be implemented over a seven-year period.
Muna Tuna, EY U.S. market access, pricing and reimbursement leader at Ernst & Young, says in the short term, manufacturers must prepare for shifting list price considerations and pricing dynamics. Over the long term, manufacturers should consider activating fit-for-purpose commercialization decisions and making digital investments.
Tuna says, “The IRA allows Medicare to negotiate the price of high-spend drugs. Even though price negotiations around selected drugs have garnered a lot of attention, the scope of these negotiations is limited to the Medicare price for single-source drugs with the highest Medicare spending that have no generic or biosimilar competition. The IRA also limits the number of drugs that can be negotiated annually. As such, after an approximately two-year period of negotiation, the final negotiated prices will be applicable to 10 Medicare drugs in 2026, followed by an additional 15 drugs in 2027, 15 more in 2028 and finally 20 more drugs by 2029. In addition, the act excludes certain types of drugs for negotiation, such as Medicare drugs with a low spend and certain orphan drugs. The IRA also stipulates that the negotiated prices will apply only to small molecule drugs that launched at least nine years ago and to biologics launched at least 13 years ago. Companies may consider accelerating the launch of potential blockbuster drugs to drive revenue considering this timing element.”
Tuna continues, “While the number of drugs included for price negotiation is relatively small in scope, drugs included in the Medicare price negotiation program could elicit price pressures on other agents within the same class. Given that the IRA’s price negotiation provisions are aimed at high-spend Medicare drugs, the oncology, immunology, and cardiometabolic categories could see the biggest impact. For biosimilars and generics, launch timing relative to the life cycle of the originator will be critical as the negotiated prices of the originator product could set a lower price than expected in the pre-IRA world.”
PhRMA released a new report on May 4 pertaining to the IRA’s impact on the development of small molecule medicines. PhRMA officials point to several key benefits regarding small molecule medicines:
- Small molecule medicines can reach therapeutic targets inside of cells.
- Small molecule medicines can cross the blood-brain barrier.
- Adherence is a key benefit from small molecule medicines as they provide greater flexibility and convenience.
- Greater convenience offered by small molecule medicines can help reduce health disparities.
According to PhRMA, “Under the law, small molecule medicines can be selected for price setting seven years after they are U.S. FDA approved, with the government set price taking effect two years later. This is substantially earlier in their lifespan than their average effective patent life of 13 to 14 years, consequently discouraging companies from investing in the R&D of these medicines. Biopharmaceutical companies are already taking the IRA into account when making tough decisions about R&D projects. In a survey of biopharmaceutical companies, 63 percent said they expect to shift R&D investment away from small molecule medicines as a result of the IRA.”
PhRMA reps say, “Given the numerous benefits of small molecule medicines, it’s important that policies and regulations support and encourage their development so patients can continue to realize the benefits they provide, now and into the future.”
Rise of the biosimilars
Since 2013, biosimilars have generated $56 billion in savings for the U.S. healthcare system, according to the first edition of Samsung Bioepis’ U.S. biosimilar market report released during Q2 2023. “Moving forward over the next five years, that total is expected to reach $181 billion in savings, as newly approved biosimilars launch and existing biosimilars see continued uptake in utilization,” the report states. “Biosimilars continue to play a crucial role in driving down healthcare costs in the United States and a collaborative approach is fundamental for sustainable growth of the U.S. biosimilar market.”
As of April 2023, the FDA had approved 40 biosimilars across 11 unique biological molecules, with 28 of those biosimilars launched in the United States.
Key findings from the report include:
- Increased biosimilar usage is correlated to lower cost, with oncology (trastuzumab, bevacizumab, rituximab) biosimilars being more price sensitive than supportive care (filgrastim, pegfilgrastim, epoetin alfa) or immunology (infliximab).
- On average, biosimilars gained 53 percent market share three years after their initial market introduction. Oncology and pegfilgrastim have seen faster acceptance (75 percent) of biosimilars versus other therapeutic areas.
- Biosimilar launches have resulted in significant price decreases over time. ASPs decreased 41 percent on average three years after first biosimilar launch. ASPs for oncology biosimilars experienced the largest decline, with each dropping more than 50 percent in the first three years after biosimilar launch.
- Insulin glargine and adalimumab categories reflect recent pricing practices including unbranded biologics and high/low wholesale acquisition cost (WAC) options. The report analyzes national average drug acquisition costs (NADAC) for products under the pharmacy benefit, whose findings indicate the potential for deep discounts and savings in insulin and adalimumab classes.
“The first edition of Biosimilar Market Report from Samsung Bioepis reveals that market competition stimulated by the introduction of biosimilars in the U.S. has contributed to significant price reductions in the biologics market. However, the level of biosimilar usage varies by molecule, with some still taking less than 50% of the market share. This indicates that there is still room for greater cost savings in therapeutic areas such as supportive care, immunology, and ophthalmology,” stated Tom Newcomer, VP, head of market access, U.S., at Samsung Bioepis. “Biosimilars continue to play a crucial role in driving down healthcare costs in the U.S. and we hope this report provides an insightful context into the forefront of the U.S. biosimilar market landscape.”
Andrew Humphreys is contributing editor, Med Ad News and PharmaLive.