Biopharma Report 2022: Brand values surge

Big buys

PricewaterhouseCoopers (pwc.com) analysts expect M&A investments during 2022 in the pharmaceutical and lifesciences space will reach $350 billion to $400 billion, driven by all subsectors. “The continuation of the $5 billion to $15 billion biotech deals, combined with medium-sized pharma ($50 billion) and medical device ($25 billion) deals is expected to drive significant investment dollars in M&A. The sector could also see a large deal ($100 billion or more) as part of a transact-to-transform strategy, given the continued need for scale. Tailwinds around the need to invest in growth and access to capital will likely more than offset the potential headwinds around drug pricing, the eminent tax rate increases and the recently active Federal Trade Commission (FTC) agenda, which could impact the ability to execute larger deals in the short term.”

According to PwC analysts, “As predicted, pharmaceutical and lifesciences (PLS) M&A rebounded in 2021 as large pharma acquisitions of biotechs continued, medical device activity increased after a pause driven by COVID-19 uncertainty and the cyclicality of the larger other/services subsector (representing three of the top 10 deals in 2021). Overall, the activity in 2021 represented a more normal year of M&A investing and some level of deferred M&A from 2020. We believe there remains a significant amount of capital allocation available for M&A, which will drive an exciting 2022.”

PwC experts anticipated that 2022 will likely see investments in high growth areas across all the subsectors. “Pharma is expected to continue investing in oncology as well as cell and gene therapy, but also in other areas such as neurology and cardiology as developments there attract greater interest. Technologies such as mRNA have already begun to attract more attention. Larger companies will look to further diversify their portfolios given they have divested heavily via sale or spins and will now need to reinvest that capital in areas that provide some exposure to adjacent areas. We see medical device companies continuing to invest in areas where oversized growth will happen as exemplified by the $1.8 billion Boston Scientific and Baylis deal.” 

PwC continues to see pharma companies looking to move away from being broader conglomerates towards being focused, innovative biopharma-centric companies. “Over the years, Pfizer, GlaxoSmithKline, Merck & Co. and others have divested or spun off large, non-core businesses. Recently, Johnson & Johnson announced it would spin off its consumer division and Novartis announced its strategic evaluation of its generics division. These transactions will free up capital and allow companies to achieve potential business investments in the future to meet their growth agendas. Divestitures will likely be a way to transform and simplify companies. We expect this heavily in the medical devices sector as well as pharma.”

Pfizer’s $11.6 billion acquisition for Biohaven Pharmaceutical Holding Company – which targets neurological and neuropsychiatric diseases, including rare disorders – ignited Wall Street expectations that the transaction may usher in more buyouts as cash-flush drug manufacturers seek to purchase “beaten-down” smaller biotech firms.

According to Reuters, the deal that was announced on May 10 is the largest in the sector to date during 2022 and “ends a dearth of large acquisitions, which along with clinical failures and investor exits following a gradual easing of the pandemic have pummeled biotech stocks.”

Coming off their worst April since 2002, the crash in biotech company valuations has made them attractive M&A targets, especially when small drugmakers are grappling with a cash crunch, industry analysts say.

“Drugmakers that benefited from their COVID-19 products such as Moderna and BioNTech have also signaled that they have enough cash for deals,” per the Reuters article. “Moderna ended the first quarter with a cash of $19.3 billion, while BioNTech said its cash position was around €10 billion ($10.55 billion).”

Pfizer agreed to acquire Biohaven, the manufacturer of Nurtec ODT, an innovative dual-acting migraine therapy approved for acute treatment and episodic prevention of migraine in adults. The New York-based company will acquire all outstanding shares of Biohaven not already owned by Pfizer for $148.50 per share in cash. Biohaven common shareholders, including Pfizer, will additionally receive 0.5 of a share of New Biohaven, a new publicly traded company that will retain Biohaven’s non-CGRP development stage pipeline compounds, per Biohaven common share.

The proposed transaction includes the acquisition of Biohaven’s calcitonin gene-related peptide (CGRP) programs including: rimegepant, which is approved in the United States under the brand name Nurtec ODT and available in the European Union under the trade name Vydura for acute treatment of migraine and prophylaxis of episodic migraine. Additionally, a New Drug Application (NDA) for zavegepant was submitted and accepted in May 2022 (based on a March 2022 filing) in the United States as an intranasal spray for the acute treatment of migraine. The new drug candidate is also undergoing development as an oral soft gel for chronic migraine prevention. If cleared for marketing, zavegepant nasal spray would be the only FDA-approved CGRP receptor antagonist in an intranasal formulation. The acquisition of Biohaven also brings a portfolio of five preclinical CGRP assets.

“The announcement builds on our legacy of delivering breakthroughs for patients living with complex pain disorders and diseases that disproportionately impact women,” stated Nick Lagunowich, Global President, Pfizer Internal Medicine. “Nurtec ODT, which is already the No. 1 prescribed migraine medicine in its class in the United States, coupled with Biohaven’s CGRP pipeline, offers hope for patients suffering from migraine worldwide. We believe Pfizer is uniquely positioned to help the portfolio reach its full potential given our leading scale and capabilities, including comprehensive field force engagement with primary care physicians, specialists and health systems delivering the right information at the right time.”

According to Biohaven Chairman and CEO Vlad Coric, M.D., “Pfizer’s capabilities will accelerate our mission to deliver our migraine medicines to even more patients, while the new R&D company is well positioned to bring value to patients and shareholders by focusing on our innovative pipeline for neurological and other disorders. We believe this transaction represents significant future value creation for patients and our collective shareholders.”

Reuters sources point to Pfizer being “flush with cash from a once-in-a-lifetime surge in revenue from COVID-19 vaccines and therapeutics and has said it is looking to buy companies or drugs that could add at least $25 billion in annual sales by the end of the decade.”

Biohaven’s migraine medicines could exceed $6 billion in yearly sales at their peak. Nurtec generated sales of $462.5 million during 2021, and “competes with two CGRP inhibitor pills from AbbVie Inc. The top selling drugs in the class are injected drugs sold by Eli Lilly and Co. and Amgen Inc.”

Biohaven was on the buying end of a potential billion-dollar-plus deal in February as the company entered into a definitive deal to acquire Channel Biosciences, a subsidiary of Knopp Biosciences, and its Kv7 channel targeting platform – adding the latest advances in ion-channel modulation to Biohaven’s growing neuroscience portfolio. The acquisition of the next-generation Kv7 channel activators include target indications such as epilepsy, pain disorders and affective disorders.

The lead asset from the Kv7 channel platform is BHV-7000, which is potentially a best-in-class potassium channel activator with a profile suggestive for low-dose efficacy, reduced GABA activity, and a wide therapeutic index. Biohaven anticipated entering BHV-7000 into the clinic during 2022 initially for treating focal epilepsy.

GlaxoSmithKline has been behind a pair of billion dollar deals during 2022. At the end of May, GSK agreed to buy U.S. clinical-stage biopharmaceutical company Affinivax and its roster of next-generation vaccines for up to $3.3 billion. GSK is expected to pay $2.1 billion upfront and up to $1.2 billion in potential development milestones.

Cambridge, Mass.-based Affinivax is pioneering the development of a novel class of vaccines, the most advanced of which are next-generation pneumococcal vaccines. The proposed acquisition provides GSK with access to a next-generation 24-valent pneumococcal vaccine candidate in Phase II studies. Affinivax’s most advanced vaccine candidate, AFX3772, includes 24 pneumococcal polysaccharides along with two conserved pneumococcal proteins (compared to up to 20 serotypes in currently approved vaccines). Also, a 30-plus valent pneumococcal candidate vaccine is undergoing preclinical development.

Affinivax has developed the highly innovative, Multiple Antigen Presenting System (MAPS) technology. The novel technology supports higher valency than conventional conjugation technologies, enabling broader coverage against prevalent pneumococcal serotypes and potentially creating higher immunogenicity than existing vaccines. 

GSK Chief Scientific Officer and President R&D Dr. Hal Barron stated, “The proposed acquisition further strengthens our vaccines R&D pipeline, provides access to a new, potentially disruptive technology, and broadens GSK’s existing scientific footprint in the Boston area. We look forward to working with the many talented people at Affinivax to combine our industry-leading development, manufacturing, and commercialization capabilities to make this exciting new technology available to those in need.”

The Affinivax transaction is expected to close during the third quarter of 2022.

According to a Reuters (reuters.com) report, as one of the world’s major vaccine manufacturers, GSK has been under pressure to shore up the company’s pharmaceutical pipeline ahead of the separation in July of its consumer business, which includes brands such as Sensodyne toothpaste and Advil painkillers.

“The drugmaker’s newer shingles vaccine has been a key growth driver as demand has returned after disruption to immunizations during the pandemic, but GSK needs a new product to bolster the vaccines business, which made 6.78 billion pounds ($8.54 billion) in 2021,” Reuters reported. “GSK is also facing competition from vaccine candidates from rivals Pfizer and Moderna using newer mRNA technology.”

In April, the British pharmaceutical giant GSK struck a deal to acquire the late-stage biopharmaceutical company Sierra Oncology for $1.9 billion. Management says Sierra Oncology’s differentiated momelotinib has the potential to address the critical unmet medical needs of myelofibrosis patients with anemia. Momelotinib complements GSK’s existing expertise in hematology, with Sierra Oncology anticipating U.S. regulatory submission during Q2 2022 and an EU filing in second-half 2022. According to GSK, sales contribution is anticipated to begin in 2023 with significant growth potential thereafter.

Sierra Oncology is a California-based, late-stage biopharma company focused on targeted therapies for treating rare forms of cancer. GSK plans to acquire Sierra Oncology for $55 per share of common stock in cash representing a total equity value of $1.9 billion (£1.5 billion).

Momelotinib has a differentiated mode of action with inhibitory activity along key signaling pathways, according to research. This activity may result in beneficial treatment effects on anemia and reduce the need for transfusions while additionally treating symptoms. Sierra Oncology announced positive topline results in January 2022, from the MOMENTUM Phase III study. The clinical trial met all primary and key secondary endpoints, showing that momelotinib achieved a statistically significant and clinically meaningful benefit on symptoms, splenic response and anemia.

GSK Chief Commercial Officer Luke Miels noted, “Sierra Oncology complements our commercial and medical expertise in hematology. Momelotinib offers a differentiated treatment option that could address the significant unmet medical needs of myelofibrosis patients with anemia, the major reason patients discontinue treatment. With this proposed acquisition, we have the opportunity to potentially bring meaningful new benefits to patients and further strengthen our portfolio of specialty medicines.”

AbbVie on March 1 completed the acquisition of Syndesi Therapeutics, which will help to expand AbbVie’s neuroscience portfolio. This acquisition gives AbbVie access to Syndesi’s portfolio of novel modulators of the synaptic vesicle protein 2A (SV2A), including the company’s lead molecule SDI-118. The mechanism is being assessed for the potential treatment of cognitive impairment and other symptoms associated with a range of neuropsychiatric and neurodegenerative disorders, including Alzheimer’s disease and major depressive disorder.

SDI-118 is a small molecule undergoing Phase 1b studies to target nerve terminals to enhance synaptic efficiency. Synaptic dysfunction is believed to underlie the cognitive impairment seen in various neuropsychiatric and neurodegenerative disorders.

AbbVie paid Syndesi shareholders a $130 million upfront payment with the potential for Syndesi shareholders to receive additional contingent payments of up to $870 million based on the achievement of certain predetermined milestones.

“There is a major unmet need for new therapies that can help improve cognitive function in patients suffering from difficult-to-treat neurologic diseases,” stated Tom Hudson, M.D., senior VP, R&D, chief scientific officer, AbbVie. “With AbbVie’s acquisition of Syndesi, we aim to advance the research of a novel, first-in-class asset for the potential treatment of cognitive impairment associated with neuropsychiatric and neurodegenerative disorders.”

Despite facing one of the steepest patent cliffs in the industry’s history, AbbVie is projected to rise up ahead of Roche to become the largest pharma company by prescription sales in 2028, according to extended consensus forecasts from Evaluate Pharma.

At the end of February, Biocon Biologics (BBL) – a subsidiary of Biocon – announced a definitive deal with the company’s partner Viatris. Biocon Biologics is acquiring Viatris’ biosimilars business to create a unique fully integrated global biosimilars enterprise. Viatris will receive consideration of up to $3.335 billion, including cash up to $2.335 billion and Compulsorily Convertible Preference Shares (CCPS) in BBL, valued at $1 billion.

This transaction accelerates BBL’s direct commercialization strategy for the company’s current and future biosimilars portfolio.

BBL will have a comprehensive portfolio comprising the company’s existing range of commercialized insulins, oncology and immunology biosimilars as well as several other biosimilar assets undergoing development. BBL additionally has access to the vaccines portfolio through the company’s previously announced partnership with Serum Institute Life Sciences (SILS).

Biocon Biologics Executive Chairperson Kiran Mazumdar-Shaw said, “This acquisition is transformational and will create a unique fully integrated, world-leading biosimilars enterprise. Our long-standing global partnership with Viatris has enabled us to achieve many firsts, setting new benchmarks for the global biosimilars industry. This strategic combination brings together the complementary capabilities and strengths of both partners and prepares us for the next decade of value creation for all our stakeholders.”

Download the list of the top 10 U.S. drugs losing exclusivity in 2022.