Elan­co to buy Bay­er's an­i­mal health busi­ness for $7.6B, as deal­mak­ing gath­ers steam in the sec­tor

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.

It’s fi­nal­ly over: Bio­gen, Ei­sai scrap big Alzheimer’s PhI­I­Is af­ter a pre­dictable BACE cat­a­stro­phe rais­es safe­ty fears

Months after analysts and investors called on Biogen and Eisai to scrap their BACE drug for Alzheimer’s and move on in the wake of a string of late-stage failures and rising safety fears, the partners have called it quits. And they said they were dropping the drug — elenbecestat — after the independent monitoring board raised concerns about…safety.

We don’t know exactly what researchers found in this latest catastrophe, but the companies noted in their release that investigators had determined that the drug was flunking the risk/benefit analysis.

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Deborah Dunsire. Lundbeck

Deb­o­rah Dun­sire is pay­ing $2B for a chance to leap di­rect­ly in­to a block­buster show­down with a few of the world's biggest phar­ma gi­ants

A year after taking the reins as CEO of Lundbeck, Deborah Dunsire is making a bold bid to beef up the Danish biotech’s portfolio of drugs in what will likely be a direct leap into an intense rivalry with a group of giants now carving up a growing market for new migraine drugs.

Bright and early European time the company announced that it will pay up to about $2 billion to buy Alder, a little biotech that is far along the path in developing a quarterly IV formulation for a CGRP drug aimed at cutting back the number of crippling migraines patients experience each month.

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Lisa M. DeAngelis, MSKCC

MSK picks brain can­cer ex­pert Lisa DeAn­ge­lis as its next CMO — fol­low­ing José Basel­ga’s con­tro­ver­sial ex­it

It’s official. Memorial Sloan Kettering has picked a brain cancer expert as its new physician-in-chief and CMO, replacing José Baselga, who left under a cloud after being singled out by The New York Times and ProPublica for failing to properly air his lucrative industry ties.

His replacement, who now will be in charge of MSK’s cutting-edge research work as well as the cancer care delivered by hundreds of practitioners, is Lisa M. DeAngelis. DeAngelis had been chair of the neurology department and co-founder of MSK’s brain tumor center and was moved in to the acting CMO role in the wake of Baselga’s departure.

Penn team adapts CAR-T tech, reengi­neer­ing mouse cells to treat car­diac fi­bro­sis

After establishing itself as one of the pioneer research centers in the world for CAR-T cancer therapies, creating new attack vehicles to eradicate cancer cells, a team at Penn Medicine has begun the tricky transition of using the basic technology for heart repair work.

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Tal Zaks. Moderna

The mR­NA uni­corn Mod­er­na has more ear­ly-stage hu­man da­ta it wants to show off — reach­ing new peaks in prov­ing the po­ten­tial

The whole messenger RNA field has attracted billions of dollars in public and private investor cash gambled on the prospect of getting in on the ground floor. And this morning Boston-based Moderna, one of the leaders in the field, wants to show off a few more of the cards it has to play to prove to you that they’re really in the game.

The whole hand, of course, has yet to be dealt. And there’s no telling who gets to walk with a share of the pot. But any cards on display at this point — especially after being accused of keeping its deck under lock and key — will attract plenty of attention from some very wary, and wired, observers.

“In terms of the complexity and unmet need,” says Tal Zaks, the chief medical officer, “this is peak for what we’ve accomplished.”

Moderna has two Phase I studies it wants to talk about now.

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It's not per­fect, but it's a good start: FDA pan­elists large­ly en­dorse Aim­mune's peanut al­ler­gy ther­a­py

Two days after a fairly benign review from FDA staff, an independent panel of experts largely endorsed the efficacy and safety of Aimmune’s peanut allergy therapy, laying the groundwork for approval with a risk evaluation and mitigation strategy (REMS).

Traditionally, peanut allergies are managed by avoidance, but the threat of accidental exposure cannot be nullified. Some allergists have devised a way to dose patients off-label with peanut protein derived from supermarket products to wean them off their allergies. But the idea behind Aimmune’s product was to standardize the peanut protein, and track the process of desensitization — so when accidental exposure in the real world invariably occurs, patients are less likely to experience a life-threatening allergic reaction.

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Rit­ter bombs fi­nal PhI­II for sole lac­tose in­tol­er­ance drug — shares plum­met

More than two years ago Ritter Pharmaceuticals managed to find enough silver lining in its Phase IIb/III study — after missing the top-line mark — to propel its lactose intolerance toward a confirmatory trial. But as it turned out, the enthusiasm only set the biotech and its investors up to be sorely disappointed.

This time around there’s little left to salvage. Not only did RP-G28 fail to beat placebo in reducing lactose intolerance symptoms, patients in the treatment group actually averaged a smaller improvement. On a composite score measuring symptoms like abdominal pain, cramping, bloating and gas, patients given the drug had a mean reduction of 3.159 while the placebo cohort saw a 3.420 drop on average (one-sided p-value = 0.0106).

Ear­ly snap­shot of Ad­verum's eye gene ther­a­py sparks con­cern about vi­sion loss

An early-stage update on Adverum Biotechnologies’ intravitreal gene therapy has triggered investor concern, after patients with wet age-related macular degeneration (AMD) saw their vision deteriorate, despite signs that the treatment is improving retinal anatomy.

Adverum, on Wednesday, unveiled 24-week data from the OPTIC trial of its experimental therapy, ADVM-022, in six patients who have been administered with one dose of the therapy. On average, patients in the trial had severe disease with an average of 6.2 anti-VEGF injections in the eight months prior to screening and an average annualized injection frequency of 9.3 injections.

Alex Ar­faei trades his an­a­lyst's post for a new role as biotech VC; Sanofi vet heads to Vi­for

Too often, Alex Arfaei arrived too late. 

An analyst at BMO Capital Markets, he’d meet with biotech or pharmaceutical heads for their IPO or secondary funding and his brain, trained on a biology degree and six years at Merck and Endo, would spring with questions: Why this biomarker? Why this design? Why not this endpoint? Not that he could do anything about it. These execs were coming for clinical money; their decisions had been made and finalized long ago.