Analysts had forecast a blockbuster year for life science mergers and acquisitions as the lower tax rate for repatriated cash kicks-in and Big Pharma continues its hunt for late-stage assets.
It seems the predictions may be coming true. Celgene and Sanofi announced two major acquisitions on Monday, worth a combined $20 billion. Below is a breakdown of the news and some of the key questions that remain.
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Celgene snags Juno Therapeutics for $9 billion
Background: Celgene is one of the hungriest biotechs in the M&A game, with a clear need for late-stage assets to replenish its oncology and autoimmune pipeline. Its revenues have been increasingly dependant on its cancer drug Revlimid, which generated net sales of $8.19 billion in 2017 — more than its three other marketed drugs combined.
Celgene raised the price of Revlimid by 20 percent last year, as its other assets underperformed and an investigational Crohn’s disease drug failed in late-stage trials. That’s not sustainable and – even if it were – patents for Revlimid expire between 2022-2027.
The good news is that it has $8.9 billion in cash and marketable securities, according to a mid-2017 Bloomberg analysis, including $6.9 billion in cash held overseas.
It’s no surprise then, that Celgene has started this year off with a bang. Several weeks ago, it announced it was acquiring Impact Biomedicines for up to $7 billion, with $1.1 billion paid upfront. The deal gives Celgene ownership of fedratinib, a JAK2 kinase inhibitor in late-stage trials for two rare blood cancers.
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Apparently, that was just an appetizer.
Headlining its new $9 billion deal is JCAR017, Juno’s CD19-directed CAR-T therapy being studied in relapsed and/or refractory diffuse large B-cell lymphoma (DLBCL). If successful, it could reach the market in 2019. Celgene is banking on the belief that it could be best-in-class, touting potential global peak sales of approximately $3 billion.
Juno has 10 other oncology programs underway, using a range of mechanisms and pursuing many different targets. There’s ample potential, but the company is still working to restore the industry’s faith after a series of fatalities led to the discontinuation of an earlier CAR-T, JCAR015.
The Juno deal: Per the merger agreement, Celgene will pay $87 per share in cash, or approximately $9 billion, using a combination of existing cash and new debt. It already owns close to 10 percent of Juno’s outstanding shares, following partnership deals in 2015 and 2016. The transaction is expected to close in Q1 of 2018.
The big question moving forward: Will all this acquisition legwork make Celgene an attractive target itself? Bigger fish, including Pfizer, are rumored to be in the market for a mega-deal. Many of them also have sizeable chunks of cash sitting in overseas accounts.
Sanofi acquires Bioverativ for $11.6 billion
Background: French pharma giant Sanofi announced Monday that it will acquire U.S. hematology specialist Bioverativ, which officially launched as a spin-out from Biogen last year.
Waltham, Massachusetts-based Bioverativ has two marketed products for hemophilia and a range of preclinical programs. It also boasts a late-stage drug for cold agglutinin disease (CAD), following its 2017 acquisition of True North Therapeutics.
Sanofi, meanwhile, appears to be in the midst of a transition. CEO Olivier Brandicourt has overseen some major layoffs in the past two years — just three days ago, the company announced 400 more U.S. positions would be axed. The cuts have focused on its diabetes and cardiovascular divisions, following pricing pressure and the loss of market exclusivity for its top-selling drug Lantus, a long-acting insulin analog.
As a result, Sanofi began looking to revive its pipeline, but it just couldn’t close. It was reportedly outbid in the $14 billion Pfizer-Medivation deal in 2016 and in the $30 billion acquisition of Actelion by Johnson & Johnson last year.
Still, one reason to be optimistic about Sanofi’s future is its partnership with Regeneron. Two drugs developed through the collaboration won FDA approval in 2017; Dupixent (dupilumab) for atopic dermatitis and Kevzara (sarilumab) for rheumatoid arthritis. Prior to its launch, EvaluatePharma forecast Dupixent could generate as much as $4.5 billion in sales annually by 2022, making it the biggest release of the year.
In a December 2017 analyst meeting, Sanofi executive said it expects to initiate 10 new Phase 3 studies in the next 12 months and to file nine regulatory submissions over the next 18 months. Executives touted a new R&D model with a shift from small molecules to biologics; from mono-targeting to multi-targeting compounds, and from licensing to proprietary assets
The Bioverativ deal: Sanofi will pay $105 cash for all outstanding Bioverativ shares, a premium of 64 percent. Some analysts have labeled that as too expensive. Sanofi’s stock price dropped over three percent following the news and around $3 billion was shaved off its market capitalization, leaving it at $109 billion.
The big question moving forward: According to Bloomberg, Bioverativ’s operating profits are on the up and up, with analysts estimating its two drugs will deliver around $560 million in 2018.
But its market could be on the verge of disruption. Better drugs are entering the hemophilia field and with recent advances in gene therapy, many believe a cure is within reach.
