GSK, Pfiz­er to cre­ate con­sumer health pow­er­house un­der JV — then spin it out

Glax­o­SmithK­line CEO Em­ma Walm­s­ley took over the reins in 2017 with an un­en­vi­able task — to re­verse the steadi­ly erod­ing for­tunes of the phar­ma­ceu­ti­cal gi­ant. Her job, be­fore ris­ing to the helm of the British drug­mak­er, was head of GSK con­sumer health­care. It is this unit she has agreed to even­tu­al­ly part with, in a deal with Pfiz­er $PFE an­nounced on Wednes­day.

The con­sumer health di­vi­sions of GSK and Pfiz­er — which raked in a com­bined $12.7 bil­lion in sales last year — are to be merged in­to a joint ven­ture, with Pfiz­er re­tain­ing a 32% mi­nor­i­ty stake and GSK hold­ing the rest. Once the two busi­ness­es have in­te­grat­ed, GSK plans to split the com­pa­ny and list the JV as a sep­a­rate en­ti­ty on the UK eq­ui­ty mar­ket.

Since tak­ing over from An­drew Wit­ty, Walm­s­ley has made in­vest­ments to for­ti­fy the phar­ma busi­ness and ramp up R&D, in­clud­ing hir­ing in­dus­try vet­er­ans to helm key posts. Last year, she hint­ed her in­ter­est in the Pfiz­er con­sumer busi­ness, which was val­ued at $20 bil­lion at the time, spook­ing in­vestors who were wor­ried such a deal would hurt the com­pa­ny’s bot­tom line. This March, GSK ef­fec­tive­ly dropped out of the race for the unit, when she eva­sive­ly said GSK would on­ly make in­vest­ments that would meet their “cri­te­ria for re­turns and not com­pro­mise our pri­or­i­ties for cap­i­tal al­lo­ca­tion,” a move that in­vestors cheered.

This new deal, which adds to GSK’s div­i­dends, could be the best of both worlds. “With our fu­ture in­ten­tion to sep­a­rate, the trans­ac­tion al­so presents a clear path­way for­ward for GSK to cre­ate a new glob­al phar­ma­ceu­ti­cals/vac­cines com­pa­ny, with an R&D ap­proach fo­cused on sci­ence re­lat­ed to the im­mune sys­tem, use of ge­net­ics and ad­vanced tech­nolo­gies, and a new world-lead­ing con­sumer health care com­pa­ny,” Walm­s­ley said.

GSK’s Lon­don-list­ed shares jumped about 7% on the news, while Pfiz­er’s NYSE-list­ed shares edged up about 1% be­fore the bell.

Al­though GSK’s con­sumer di­vi­sion used to op­er­ate as a JV with Swiss phar­ma­ceu­ti­cal gi­ant No­var­tis $NVS, the British drug­mak­er bought out the lat­ter in a $13 bil­lion deal ear­li­er this year. If ap­proved by GSK share­hold­ers and reg­u­la­tors, the new deal is ex­pect­ed to close in the sec­ond half of 2019 cre­at­ing a JV that will be the largest glob­al con­sumer health busi­ness, the com­pa­nies said on Wednes­day.

“The JV will be a glob­al leader in the frag­ment­ed over-the-counter mar­ket, with 7.2% mar­ket share, well ahead of the 4.1% of its near­est com­peti­tors (such as J&J, Bay­er etc) and will hold the #1 or #2 po­si­tions in all key ge­o­gra­phies, in­clud­ing the US and Chi­na,” Jef­feries an­a­lyst Pe­ter Welford wrote in a note.

Un­til sep­a­ra­tion, the JV — which will bring brands such as GSK’s Sen­so­dyne and Pfiz­er’s Advil un­der the same roof — will be con­sol­i­dat­ed in GSK’s fi­nan­cial state­ments, and run by Walm­s­ley. The trans­ac­tion, if con­sum­mat­ed, is ex­pect­ed to be slight­ly ac­cre­tive to Pfiz­er in the first three years of clos­ing, and to gen­er­ate sav­ings of $650 mil­lion. Pfiz­er and GSK al­ready an ex­ist­ing JV for HIV.

The 2017 ad­just­ed op­er­at­ing mar­gins for the two com­pa­nies were broad­ly sim­i­lar: “at 17.6% for GSK and 17.3% for Pfiz­er, sug­gest­ing be­yond the cost sav­ings of the merg­er, man­age­ment al­so en­vis­ages sig­nif­i­cant ben­e­fits from scale,” Welford added.

In a con­fer­ence call with re­porters fol­low­ing the an­nounce­ment, Walm­s­ley sug­gest­ed the UK list­ing for the con­sumer busi­ness was a mat­ter of tra­di­tion, de­spite the un­cer­tain­ty of Brex­it: “whether that be our sci­ence base, the qual­i­ty of ed­u­ca­tion…op­por­tu­ni­ties of in­no­va­tion…man­u­fac­tur­ing and tech­ni­cal knowhow or in­deed the cre­ative in­dus­tries which are very im­por­tant for con­sumer brand-build­ing.”

“Ob­vi­ous­ly right now is a pe­ri­od that’s pret­ty dif­fi­cult and rather un­cer­tain, and we would all like to get to cer­tain­ty as soon as pos­si­ble…the key thing is that any sep­a­ra­tion in new head­quar­ters is go­ing to be af­ter a few years when I am con­fi­dent we will be in a more set­tled en­vi­ron­ment than we are to­day,” she said.


Im­age: Em­ma Walm­s­ley. GSK

The top 10 block­buster drugs in the late-stage pipeline — Eval­u­ate adds 6 new ther­a­pies to heavy-hit­ter list

Vertex comes in for a substantial amount of criticism for its no-holds-barred tactical approach toward wresting the price it wants for its commercial drugs in Europe. But the flip side of that coin is a highly admired R&D and commercial operation that regularly wins kudos from analysts for their ability to engineer greater cash flow from the breakthrough drugs they create.

Both aspects needed for success in this business are on display in the program backing Vertex’s triple for cystic fibrosis. VX-659/VX-445 + Tezacaftor + Ivacaftor — it’s been whittled down to 445 now — was singled out by Evaluate Pharma as the late-stage therapy most likely to win the crown for drug sales in 5 years, with a projected peak revenue forecast of $4.3 billion.

The latest annual list, which you can see here in their latest world preview, includes a roster of some of the most closely watched development programs in biopharma. And Evaluate has added 6 must-watch experimental drugs to the top 10 as drugs fail or go on to a first approval. With apologies to the list maker, I revamped this to rank the top 10 by projected 2024 sales, instead of Evaluate's net present value rankings.

It's how we roll at Endpoints News.

Here is a quick summary of the rest of the top 10:

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Arc­turus ex­pands col­lab­o­ra­tion, adding $30M cash; Ku­ra shoots for $100M raise

→  Rare dis­ease play­er Ul­tragenyx $RARE is ex­pand­ing its al­liance with Arc­turus $ARCT, pay­ing $24 mil­lion for eq­ui­ty and an­oth­er $6 mil­lion in an up­front as the two part­ners ex­pand their col­lab­o­ra­tion to in­clude up to 12 tar­gets. “This ex­pand­ed col­lab­o­ra­tion fur­ther so­lid­i­fies our mR­NA plat­form by adding ad­di­tion­al tar­gets and ex­pand­ing our abil­i­ty to po­ten­tial­ly treat more dis­eases,” said Emil Kakkis, the CEO at Ul­tragenyx. “We are pleased with the progress of our on­go­ing col­lab­o­ra­tion. Our most ad­vanced mR­NA pro­gram, UX053 for the treat­ment of Glyco­gen Stor­age Dis­ease Type III, is ex­pect­ed to move in­to the clin­ic next year, and we look for­ward to fur­ther build­ing up­on the ini­tial suc­cess of this part­ner­ship.”

UP­DAT­ED: Chica­go biotech ar­gues blue­bird, Third Rock 'killed' its ri­val, pi­o­neer­ing tha­lassemia gene ther­a­py in law­suit

Blue­bird bio $BLUE chief Nick Leschly court­ed con­tro­ver­sy last week when he re­vealed the com­pa­ny’s be­ta tha­lassemia treat­ment will car­ry a jaw-drop­ping $1.8 mil­lion price tag over a 5-year pe­ri­od in Eu­rope — mak­ing it the plan­et’s sec­ond most ex­pen­sive ther­a­py be­hind No­var­tis’ $NVS fresh­ly ap­proved spinal mus­cu­lar at­ro­phy ther­a­py, Zol­gens­ma, at $2.1 mil­lion. A Chica­go biotech, mean­while, has been fum­ing at the side­lines. In a law­suit filed ear­li­er this month, Er­rant Gene Ther­a­peu­tics al­leged that blue­bird and ven­ture cap­i­tal group Third Rock un­law­ful­ly prised a vi­ral vec­tor, de­vel­oped in part­ner­ship with the Memo­r­i­al Sloan Ket­ter­ing Can­cer Cen­ter (MSK), from its grasp, and thwart­ed the de­vel­op­ment of its sem­i­nal gene ther­a­py.

Dave Barrett, Brian Chee, Amir Nashat, Amy Schulman. Polaris

Bob Langer's first port of call — Po­laris Part­ners — maps $400M for ninth fund

Health and tech ven­ture group Po­laris Part­ners, which counts Alec­tor, Al­ny­lam and Ed­i­tas Med­i­cine as part of its port­fo­lio, is set­ting up its ninth fund, rough­ly two years af­ter it closed Po­laris VI­II with $435 mil­lion in the bank, sur­pass­ing its tar­get by $35 mil­lion.

The Boston-based firm, in an SEC fil­ing, said it in­tends to raise $400 mil­lion for the fund. Po­laris — which rou­tine­ly backs com­pa­nies mold­ed out of the work done in the lab of pro­lif­ic sci­en­tist Bob Langer of MIT  — typ­i­cal­ly in­vests ear­ly, and sticks around till com­pa­nies are in the green. Like its peers at Flag­ship and Third Rock, Po­laris is all about cham­pi­oning the lo­cal biotech scene with a steady flow of start­up cash.

John Chiminski, Catalent CEO - File Photo

'It's a growth play': Catal­ent ac­quires Bris­tol-My­er­s' Eu­ro­pean launch pad, ex­pand­ing glob­al CD­MO ops

Catalent is staying on the growth track.

Just two months after committing $1.2 billion to pick up Paragon and take a deep dive into the sizzling hot gene therapy manufacturing sector, the CDMO is bouncing right back with a deal to buy out Bristol-Myers’ central launchpad for new therapies in Europe, acquiring a complex in Anagni, Italy, southwest of Rome, that will significantly expand its capacity on the continent.

There are no terms being offered, but this is no small deal. The Anagni campus employs some 700 staffers, and Catalent is planning to go right in — once the deal closes late this year — with a blueprint to build up the operations further as they expand on oral solid, biologics, and sterile product manufacturing and packaging.

This is an uncommon deal, Catalent CEO John Chiminski tells me. But it offers a shortcut for rapid growth that cuts years out of developing a green fields project. That’s time Catalent doesn’t have as the industry undergoes unprecedented expansion around the world.

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David de Graaf now has his $28.5M launch round in place, build­ing a coen­zyme A plat­form in his lat­est start­up

Long­time biotech ex­ec David de Graaf has the cash he needs to set up the pre­clin­i­cal foun­da­tion for his coen­zyme A me­tab­o­lism com­pa­ny Comet. A few high-pro­file in­vestors joined the ven­ture syn­di­cate to sup­ply Comet with $28.5 mil­lion in launch mon­ey — enough to get it two years in­to the plat­form-build­ing game, with­in knock­ing dis­tance of the clin­ic.

Canaan jumped in along­side ex­ist­ing in­vestor Sofinno­va Part­ners to co-lead the round, with par­tic­i­pa­tion by ex­ist­ing in­vestor INKEF Cap­i­tal and new in­vestor BioIn­no­va­tion Cap­i­tal.

Neil Woodford. Woodford Investment Management via YouTube

Wood­ford braces po­lit­i­cal storm as UK fi­nan­cial reg­u­la­tors scru­ti­nize fund sus­pen­sion

The shock of Neil Wood­ford’s de­ci­sion to block with­drawals for his flag­ship fund is still rip­pling through the rest of his port­fo­lio — and be­yond. Un­der po­lit­i­cal pres­sure, UK fi­nan­cial reg­u­la­tors are now tak­ing a hard look while in­vestors con­tin­ue to flee.

In a re­sponse let­ter to an MP, the Fi­nan­cial Con­duct Au­thor­i­ty re­vealed that it’s opened an in­ves­ti­ga­tion in­to the sus­pen­sion fol­low­ing months of en­gage­ment with Link Fund So­lu­tions, which tech­ni­cal­ly del­e­gat­ed Wood­ford’s firm to man­age its funds.

Gilead baits new al­liance with $45M up­front, div­ing in­to the busy pro­tein degra­da­tion field

Gilead is jump­ing on board the pro­tein degra­da­tion band­wag­on. And they’re turn­ing to a low-pro­file Third Rock start­up for the ex­per­tise. But if you were look­ing for a trans­for­ma­tion­al deal to kick up fresh en­thu­si­asm for Gilead, you’ll have to re­main pa­tient.

This one will have a long way to go be­fore they get in­to the clin­ic.

The big biotech said Wednes­day morn­ing that it is pay­ing $45 mil­lion up­front and re­serv­ing a whop­ping $2.3 bil­lion in biotech bucks if San Fran­cis­co-based Nurix can point the way to new can­cer ther­a­pies, as well as drugs for oth­er, un­spec­i­fied dis­eases.

A new num­ber 1 drug? Keytru­da tapped to top the 10 biggest block­busters on the world stage by 2024

Analysts may be fretting about Keytruda’s longterm prospects as a host of rival therapies elbow their way to the market. But the folks at Evaluate Pharma are confident that last year’s $7 billion earner is headed for glory, tapping it to beat out the current #1 therapy Humira as AbbVie watches that franchise swoon over the next 5 years.

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