Pfiz­er to com­bine its off-patent drug unit with My­lan

Pfiz­er — My­lan’s man­u­fac­tur­ing part­ner for its flag­ship EpiPen — is com­bin­ing its off-patent drug busi­ness with the gener­ic drug­mak­er, in a hair­cut de­signed to fo­cus on the health­i­er parts of its busi­ness.

The trans­ac­tion is ex­pect­ed to come in the form of a stock deal in which My­lan $MYL share­hold­ers would own a lit­tle more than 40% of the new en­ti­ty and Pfiz­er $PFE share­hold­ers the re­main­der. Pfiz­er is al­so slat­ed to re­ceive about $12 bil­lion in pro­ceeds from a new sale of debt.

The busi­ness, called Up­john, is based in Shang­hai (to fo­cus on emerg­ing mar­kets), and in­cludes prod­ucts that once gen­er­at­ed block­buster sales such as the cho­les­terol drug Lip­i­tor, the erec­tile dys­func­tion drug Vi­a­gra and the painkiller Lyri­ca.

The US gener­ics in­dus­try has suf­fered in re­cent years due to pric­ing pres­sure and com­pe­ti­tion from man­u­fac­tur­ers based in low-and-mid­dle-in­come coun­tries such as In­dia. Gener­ic drug mak­ers have been con­sol­i­dat­ing in the hope that economies of scale will steady the ship and al­low them to in­vest fur­ther in­to biosim­i­lars, which bring rich­er prof­its ver­sus their gar­den va­ri­ety gener­ic med­i­cine coun­ter­parts.

Ken Cac­cia­tore Cowen

Last year, In­dia’s Au­robindo Phar­ma inked a deal to pur­chase parts of No­var­tis’ $NVS gener­ic med­i­cine busi­ness for up to $1 bil­lion. Te­va $TE­VA  — the world’s largest gener­ic mak­er — bought Al­ler­gan’s vast gener­ic busi­ness in a $40.5 bil­lion deal in 2015.

Will the deal fix My­lan’s woes? No, said Cowen’s Ken Cac­cia­tore in a note. For 2019, man­age­ment is an­tic­i­pat­ing ad­just­ed free cash flow to reach $1.9 bil­lion to $2.3 bil­lion — dra­mat­i­cal­ly low­er ver­sus 2018 — and es­sen­tial­ly the same as the 2015 lev­els, he point­ed out. 

“(W)e have long felt that stand­alone My­lan was ab­solute­ly bro­ken…this de­te­ri­o­ra­tion of ad­just­ed free cash flow over the last few years has been de­spite a tremen­dous in­vest­ment ($15B+) to­ward both com­pa­ny and prod­uct ac­qui­si­tions,” he wrote.

“(E)ven with the launch­es of Co­pax­one, Neu­las­ta, Ad­vair and oth­ers that should add $1B+ in 2019, these ap­provals are on­ly pro­vid­ing some re­lief, but are not al­ter­ing the sys­temic prob­lems in­her­ent with the gener­ic mod­el. Very rarely do we see such a sys­temic and wealth de­stroy­ing mess,” he added.

The com­bined en­ti­ty is ex­pect­ed to gen­er­ate pro for­ma rev­enue of $19 to $20 bil­lion next year, the com­pa­nies said.

The Up­john/My­lan guid­ance is ac­tu­al­ly mod­est­ly low­er than what Cac­cia­tore had first pre­dict­ed. “This on­ly adds con­vic­tion to our orig­i­nal the­sis that this merg­er will solve noth­ing, and that the pres­sure and neg­a­tive view of the com­bi­na­tion will like­ly on­ly in­crease in­to the even­tu­al close,” he wrote.

My­lan chief Heather Bresch is set to de­part to make room for Pfiz­er’s Michael Goet­tler, the cur­rent group pres­i­dent of Up­john, who will take over as the com­bined com­pa­ny’s CEO. Bresch in­vit­ed a storm of crit­i­cism in 2016 af­ter pric­ing a pair of EpiPen’s for more than $600, up from the from $100 in 2007, when My­lan ac­quired the prod­uct. Un­der siege, the com­pa­ny even­tu­al­ly start­ed sell­ing its own gener­ic ver­sion at a 50% dis­count.

How­ev­er, oth­er mem­bers of the se­nior My­lan team will al­so stick around. Chair­man Robert Coury, will serve as ex­ec­u­tive chair­man of the new com­pa­ny and Ra­jiv Ma­lik, cur­rent My­lan Pres­i­dent, will re­main as pres­i­dent of the com­bined en­ti­ty.

“Many are ar­gu­ing that this new en­ti­ty will find it­self bet­ter po­si­tioned than stand­alone My­lan. We are not sure that is the right ques­tion, and we are now even more un­sure whether that state­ment is even ac­cu­rate giv­en…that the se­nior My­lan man­age­ment still ap­pears that they are firm­ly in con­trol,” Cac­cia­tore said.

Al­bert Bourla

Pfiz­er, in re­cent months, has been try­ing to rein­vent it­self. Al­bert Bourla took over the reins of the com­pa­ny, af­ter his pre­de­ces­sor Ian Read spent some time away from M&A to fo­cus on the com­pa­ny’s in­ter­nal pipeline — af­ter some of his bets went sour (re­mem­ber Medi­va­tion?) and gener­ic com­pe­ti­tion took a bite out of the com­pa­ny’s once-biggest sell­ers. Bourla has since re­vert­ed to Pfiz­er’s ag­gres­sive deal-mak­ing roots to re­vive growth by sharp­en­ing fo­cus on can­cer, heart and rare dis­eases.

In late De­cem­ber, Pfiz­er an­nounced plans to cre­ate a con­sumer health pow­er­house with GSK $GSK in the form of a joint ven­ture, and then spin it out. In May, the com­pa­ny agreed to pay up to $810 mil­lion to buy pri­vate Swiss biotech­nol­o­gy com­pa­ny Ther­a­chon for its ex­per­i­men­tal ther­a­py to treat dwarfism. Last month, Pfiz­er agreed to shell out $11.4 bil­lion for on­col­o­gy com­pa­ny Ar­ray Bio­phar­ma.

“We do not as­sume that tak­ing this ac­tion now fore­tells the suc­cess of PFE’s new prod­ucts, but we al­so can­not dis­count that thought en­tire­ly. It is un­like­ly that this deal was a com­pet­i­tive sit­u­a­tion, since few com­pa­nies could have un­der­tak­en a sim­i­lar move, so it prob­a­bly could have been ex­e­cut­ed in 1-2 years just as eas­i­ly,” Cowen’s Steve Scala an­a­lysts wrote in a note.

“Whether PFE share­hold­ers wish to hold MYL stock is an­oth­er ques­tion, as they are un­like­ly to own PFE shares for Up­john. What ex­po­sure PFE Bio­phar­ma has to emerg­ing mar­kets is un­clear, but it clear­ly will no longer have an in­dus­try-lead­ing po­si­tion.”

The Wall Street Jour­nal and lat­er Reuters over the week­end first re­port­ed the deal.

So­cial im­age: Pfiz­er, AP Im­ages

Have a new drug that promis­es to fight Covid-19? The FDA will see you now

After providing an emergency approval to use malaria drugs against coronavirus with little actual evidence of their efficacy or safety in that setting, the FDA has already proven that it has set aside the gold standard when it comes to the pandemic. And now regulators have spelled out a new approach to speeding development that promises immediate responses in no uncertain terms — promising a program offering the ultimate high-speed pathway to Covid-19 drug approvals.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 77,100+ biopharma pros reading Endpoints daily — and it's free.

In a stun­ning set­back, Amarin los­es big patent fight over Vas­cepa IP. And its high-fly­ing stock crash­es to earth

Amarin’s shares $AMRN were blitzed Monday evening, losing billions in value as reports spread that the company had lost its high-profile effort to keep its Vascepa patents protected from generic drugmakers.

Amarin had been fighting to keep key patents under lock and key — and away from generic rivals — for another 10 years, but District Court Judge Miranda Du in Las Vegas ruled against the biotech. She ruled that:
(A)ll the Asserted Claims are invalid as obvious under 35 U.S.C.§ 103. Thus, the Court finds in favor of Defendants on Plaintiff’s remaining infringementclaim, and in their favor on their counterclaims asserting the invalidity of the AssertedClaims under 35 U.S.C. § 103.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 77,100+ biopharma pros reading Endpoints daily — and it's free.

Once fu­ri­ous over No­var­tis’ da­ta ma­nip­u­la­tion scan­dal, the FDA now says it’s noth­ing they need to take ac­tion on

Back in the BP era — Before Pandemic — the FDA ripped Novartis for its decision to keep the agency in the dark about manipulated data used in its application for Zolgensma while its marketing application for the gene therapy was under review.

Civil and criminal sanctions were being discussed, the agency noted in a rare broadside at one of the world’s largest pharma companies. Notable lawmakers cheered the angry regulators on, urging the FDA to make an example of Novartis, which fielded Zolgensma at $2.1 million — the current record for a one-off therapy.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 77,100+ biopharma pros reading Endpoints daily — and it's free.

Dai­ichi Sankyo sinks $200M in­to new gene ther­a­py tech from Ul­tragenyx

In a leap to the gene therapy space, Daiichi Sankyo has dropped $200 million to access Ultragenyx’s manufacturing technology, providing the rare disease biotech with plenty of cash and a stock boost amid a general cash crunch.

For $125 million in cash and a $75 million equity investment, Daiichi Sankyo has bought a non-exclusive license to the IP around two platforms with which it plans to develop AAV-based gene therapy products. The Japanese pharma is purchasing the stock $RARE at $60 per share, more than a third above its current price of $44.43.

Covid-19 roundup: GSK, Am­gen tai­lor R&D work to fit the coro­n­avirus age; Doud­na's ge­nomics crew launch­es di­ag­nos­tic lab

You can add Amgen and GSK to the list of deep-pocket drug R&D players who are tailoring their pipeline work to fit a new age of coronavirus.

Following in the footsteps of a lineup of big players like Eli Lilly — which has suspended patient recruitment for drug studies — Amgen and GSK have opted to take a more tailored approach. Amgen is intent on circling the wagons around key studies that are already fully enrolled, and GSK has the red light on new studies while the pandemic plays out.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 77,100+ biopharma pros reading Endpoints daily — and it's free.

Arie Belldegrun, Endpoints @ JPM20 Breakfast Panel. Photography by Jeff Rumans.

Mo­tion de­nied: Gilead still on the hook for $1.5B in dam­ages over CAR-T patent dis­pute with Bris­tol My­ers Squibb

Gilead’s bid to overturn a jury verdict that ordered it to pay Bristol Myers Squibb about $752 million for CAR-T patents owned by its subsidiary Juno Therapeutics has ended in vain.

The ruling leaves Gilead vulnerable to an even bigger $1.5 billion payment that Bristol is now demanding — adding fuel to the fiery criticism some analysts are already heaping on its $11.9 billion Kite buyout.

In a 30-page document unsealed on Monday, Judge James Otero of the district court in Los Angeles struck down several different arguments for a new decision. Here are Morgan Stanley analysts’ takeaways:
The court, in particular, denied Kite’s contentions (1) that Juno’s patent is invalid, (2) the damages award was unreasonable, and (3) that a new trial should take place. The court also denied Kite’s argument that its infringement was not willful.
Gilead is likely to appeal to the federal circuit, they noted, but the odds are not in their favor as the same standard for evidence will be applied in that court. Appeals typically take 16 months.

A quiver of ar­rows for im­mune dis­or­ders: Pan­dion scores $80M in fresh fund­ing

Scientists began with making recombinant versions of naturally-occurring human proteins, then graduated to monoclonal antibodies. Now, rather than replicating moieties within the body, researchers are modifying these molecules to have precise biology in a functional manner.

This technology, referred to as bispecific antibodies, is already being employed to fight cancer. In early 2018, Pandion Therapeutics was born to reverse-engineer the science into the realm of autoimmune and inflammatory disorders.

It is 'kind of a proven tech­nol­o­gy': Hep B vac­cine mak­er joins glob­al hunt for coro­n­avirus vac­cine

Using lab-grown proteins that are engineered to mimic the architecture of viruses to induce an immune response, VBI Vaccines is joining the hunt for a coronavirus vaccine — harnessing technology that has initially been proved safe in early trials as a prophylactic for cytomegalovirus (CMV) infection.

Unlike the raft of the companies in the Covid-19 vaccine race — including Moderna, CureVac and J&J — VBI is taking a pan-coronavirus approach, by developing a vaccine that will encompass Covid-19, severe acute respiratory syndrome (SARS), and Middle East respiratory syndrome (MERS).

Can a pair of top AveX­is alum­ni steer a new gene ther­a­py up­start to R&D glo­ry? 3 VCs bet $60M on it

VCs love few things more than a proven executive team when it comes to launching a new company. And now a group of A-listers has turned to a pair of top execs out of AveXis to steer the latest gene therapy player into the clinic.

The biotech is Waltham, MA-based Affinia and the two execs are Sean Nolan and Rick Modi — the former CEO and CBO respectively of AveXis, the gene therapy pioneer that fetched $8.7 billion in a sale to Novartis. Nolan has now taken the chairman’s role at Affinia while Modi moves up to the CEO post at the company.