Last week, Elan­co ex­plic­it­ly dodged an­swer­ing ques­tions about its ru­mored in­ter­est in Bay­er’s ani­mal health busi­ness in its post-earn­ings call. On Tues­day, the Eli Lil­ly spin­off dis­closed it was pur­chas­ing the Ger­man drug mak­er’s vet­eri­nary unit in a cash-and-stock deal worth $7.6 bil­lion. 

Elan­co $ELAN has been busy on the deal-mak­ing front. In April, it laid out plans to swal­low its part­ner, Kansas-based pet ther­a­peu­tics com­pa­ny Aratana $PETX. A Ju­ly re­port by Reuters sug­gest­ed a po­ten­tial Bay­er deal was be­ing ex­plored, and Bloomberg last week said the deal was im­mi­nent, cit­ing sources. 

Deal mak­ing with­in the AH space is par­tic­u­lar­ly at­trac­tive — ver­sus the field of hu­man health­care — prod­uct port­fo­lios are more sus­tain­able, ex­po­sure to gener­ic threats is lim­it­ed, and there is es­sen­tial­ly no di­rect ex­po­sure to pay­or re­im­burse­ment cuts.

When the Elan­co/Bay­er ru­mors were swirling, Cred­it Su­isse’s Erin Wright an­a­lyzed the ra­tio­nale be­hind the deal in a note ear­li­er this month.

“The the­o­rized deal rep­re­sents a mean­ing­ful de­par­ture from the pre­vi­ous the­sis for ELAN, which was large­ly pred­i­cat­ed on its mean­ing­ful mar­gin ex­pan­sion sto­ry (~1,000 bps by 2023) and in­no­va­tion ef­forts, where it boasts >100 R&D pro­grams with 36 nov­el “shots on goal” over the next 5 years, with al­so sup­port from re­cent (PETX) and oth­er M&A/part­ner­ships, lever­ag­ing its flex­i­bil­i­ty as a stand­alone en­ti­ty,” she wrote. “The scale of the deal is al­so clear­ly sur­pris­ing…giv­en BAH’s mea­ger growth tra­jec­to­ry, un­less there are hid­den gems in its R&D pipeline, we aren’t en­tire­ly sure how this will ad­vance ELAN as a stand­alone en­ti­ty.”

Bay­er is un­der pres­sure to raise cash and lift its mar­ket val­ue fol­low­ing its $63 bil­lion pur­chase of agro­chem­i­cal com­pa­ny Mon­san­to. Last No­vem­ber, the Ger­man drug gi­ant an­nounced it was plan­ning to ex­it the an­i­mal health busi­ness, which is skewed to­wards com­pan­ion an­i­mal (60%) ver­sus live­stock (40%), rel­a­tive to its peers.

“While it boasts a port­fo­lio of >100 prod­ucts and pres­ence across 120 coun­tries (3,500 em­ploy­ees glob­al­ly), it has dis­pro­por­tion­ate ex­po­sure to key prod­ucts, with 62% of sales de­rived from four prod­uct lines, rep­re­sent­ing a rel­a­tive­ly con­cen­trat­ed port­fo­lio,” Wright not­ed.

Un­der the terms of the deal, Bay­er will get $5.32 bil­lion in cash and rough­ly 68 mil­lion Elan­co An­i­mal Health com­mon shares. The deal is set to ex­pand Elan­co’s ar­se­nal of prod­ucts, in­clud­ing the ad­di­tion of par­a­siti­cides (top­i­cal treat­ments, col­lars), en­able com­pan­ion health to ac­count for half of its busi­ness, and aug­ment its R&D pipeline.

The trans­ac­tion, which is ex­pect­ed to close in mid-2020, will cre­ate the sec­ond-largest an­i­mal health com­pa­ny in the field, Elan­co said. Last year, Elan­co gen­er­at­ed sales of about $3.1 bil­lion, while Bay­er’s AH unit raked in about $1.6 bil­lion. The lead­ing firm in the sec­tor — Zoetis — brought in rough­ly $5.8 bil­lion in 2018 sales.

The an­i­mal health space is ripe for con­sol­i­da­tion, and M&A will con­tin­ue — as in­dus­try play­ers look to ex­pand their mar­ket share across ge­o­gra­phies and in “tan­gen­tial busi­ness­es to low­er ex­po­sure to any one re­gion, prod­uct line, or species,” Wright added on Tues­day.

Hepatitis delta, also known as hepatitis D, is a liver infection caused by the hepatitis delta virus (HDV) that results in the most severe form of human viral hepatitis for which there is no approved therapy.

HDV is a single-stranded, circular RNA virus that requires the envelope protein (HBsAg) of the hepatitis B virus (HBV) for its own assembly. As a result, hepatitis delta virus (HDV) infection occurs only as a co-infection in individuals infected with HBV. However, HDV/HBV co-infections lead to more serious liver disease than HBV infection alone. HDV is associated with faster progression to liver fibrosis (progressing to cirrhosis in about 80% of individuals in 5-10 years), increased risk of liver cancer, and early decompensated cirrhosis and liver failure.
HDV is the most severe form of viral hepatitis with no approved treatment.
Approved nucleos(t)ide treatments for HBV only suppress HBV DNA, do not appreciably impact HBsAg and have no impact on HDV. Investigational agents in development for HBV target multiple new mechanisms. Aspirations are high, but a functional cure for HBV has not been achieved nor is one anticipated in the forseeable future. Without clearance of HBsAg, anti-HBV investigational treatments are not expected to impact the deadly course of HDV infection anytime soon.

More than 3 years after Merck stepped up and paid $1 billion in cold, hard cash to gain the US commercial rights to Bayer’s high-risk heart drug vericiguat in a broad-ranging cardio alliance, the partners say their Phase III study has come through with promising data and a date with regulators.
We don’t have the data, and won’t until they put it out at an upcoming scientific session, but Merck touted the results, saying that their big Phase III VICTORIA study hit the primary endpoint  — with vericiguat combined with available therapies reducing “the risk of the composite endpoint of heart failure hospitalization or cardiovascular death in patients with worsening chronic heart failure with reduced ejection fraction (HFrEF) compared to placebo when given in combination with available heart failure therapies.”
Depending on the hard data, and how it breaks out with the combinations used, this drug could pose a threat to Novartis’ blockbuster drug Entresto, currently at $1.6 billion while analysts expect peak sales to hit $4 billion.
The drug is a soluble guanylate cyclase (sGC) stimulator, which Bayer and Merck have had high hopes for. Evidently, so did cardiologists. Cowen’s last analysis set potential sales at $400 million in 2024, but that number could go up significantly now.
Cowen’s Steve Scala noted this morning:
Vericiguat could be a lucrative product for Merck, and one with potentially under-appreciated value. At Cowen’s Therapeutics Conference in September 2019, 80% of specialists anticipated a positive result from VICTORIA whereas only 51% of investors shared this optimism.
Investigators recruited more than 5,000 patients at more than 600 centers in 42 countries for this study — one of the most expensive propositions in R&D. Millions of people in the US suffer from heart failure with reduced ejection fraction when the failing heart fails to contract properly to eject blood into the system. Bayer holds ex-US rights to the drug and also stands to earn cash from the $1.1 billion in milestones Merck agreed on for their collaboration.
Remarkably, the drug was pushed into Phase III despite failing the mid-stage trial — though investigators flagged a success at the high dose of 10 mg. In VICTORIA, researchers started patients at 2.5 mg and then titrated up to 5 and then 10 mg.

Thirteen of the top biotech venture capitalists in the country wrote a letter last week warning lawmakers that if Congress passes a drug pricing bill House Speaker Nancy Pelosi has put before lawmakers, they won’t be able to invest in biomedical research at their current rate, and patients will suffer.

“If policies such as those included within H.R. 3, the Lower Drug Costs Now Act, are passed, our ability to continue to invest in future biomedical innovation will be severely constrained, thus crushing the hopes of millions of patient waiting for the next breakthroughs to treat or cure their cancers, rare genetic diseases, Alzheimer’s, or other serious and life-threatening conditions,” they wrote in a letter addressed to the highest-ranking Democrats and Republicans in the House and Senate and acquired by Endpoints News. 

Turns out Dicerna wasn’t done with deals yet after locking in $200 million upfront from Roche for a hepatitis B cocktail two weeks ago.

Novo Nordisk has signed on as the latest partner to its GalXC RNAi platform, handing over $175 million in cash to claim any and all targets of interest in liver-related cardio-metabolic diseases that are not already reserved in previous pacts. The Danish drugmaker — which has signaled its interest to expand considerably beyond its core diabetes franchise into areas like NASH — is also purchasing $50 million worth of Dicerna’s equity at a 25% premium of $21.93 per share. More research payments and milestones extending to the billions are on the line.

→ Gene therapy maker Orchard Therapeutics has been granted an accelerated assessment for OTL-200 by the EMA’s Committee for Medicinal Products for Human Use (CHMP). The gene therapy — in development in partnership with the San Raffaele-Telethon Institute for Gene Therapy (SR-Tiget) in Milan, Italy — being used towards the treatment of metachromatic leukodystrophy.

→ Pharmaceutical Product Development has announced that its parent company, PPD, Inc has submitted a draft to the SEC relating to the proposal of an IPO of the parent company’s common stock. Number of shares and price range have not yet been determined.

In the story lawmakers and drug pricing reform advocates have told about the drug industry, there are perhaps few greater villains than Humira and its maker AbbVie.

Between 2012 and 2018, AbbVie upped the drug’s annual after-rebates cost from $19,000 to $38,000 in the US, with sticker prices now over $60,000 per year — increases that led to accusations of price gouging, most recently from Democratic presidential frontrunner Elizabeth Warren.