Pin­ing for a megadeal, an an­a­lyst kicks the tires for an­oth­er Gilead M&A test dri­ve

John Mil­li­gan

Gilead CEO John Mil­li­gan drew plen­ty of nods re­cent­ly when he said you have to ig­nore what’s go­ing on in Wash­ing­ton DC and just run your busi­ness. But he was ig­nor­ing top an­a­lysts long be­fore he got a chance to tune out the Trump ad­min­is­tra­tion.

Some promi­nent stock watch­ers have been in­sist­ing for some time now that Mil­li­gan and Gilead $GILD have to use a moun­tain of cash on hand to grab a big pipeline/port­fo­lio that can reen­er­gize the falling num­bers in their rev­enue fore­casts. With the hep C peak be­hind it, the stock needs new moun­tains to climb to in­spire in­vestors. But the CEO sits on Gilead’s cash and qui­et­ly bides his time – just like al­most every oth­er big play­er that’s sup­posed to be in the buy­ers’ cir­cle this year.

Ge­of­frey Porges, Leerink

Not too both­ered by that, Leerink’s Ge­of­frey Porges has not on­ly spelled out the rea­sons why he’d cheer a Ver­tex $VRTX buy­out, twice, he’s now ex­pand­ing Mil­li­gan’s menu with an­oth­er biotech that is on every­one’s M&A watch list: In­cyte $IN­CY.

Porges still likes Ver­tex best. It has a proven pres­ence in the cys­tic fi­bro­sis mar­ket with a good pipeline. The num­bers can work. An In­cyte deal would de­pend on see­ing its IDO1 star epaca­do­stat come through with an ap­proval and a mar­ket hit to war­rant the cash need­ed to buy a com­pa­ny with a mar­ket cap of $27 bil­lion. But Porges be­lieves that if they get in there and re­al­ly carve up the ex­pense side of the busi­ness at the Delaware biotech — read: big lay­offs — an ac­qui­si­tion can play out quite nice­ly. There’s up­side in the hot im­muno-on­col­o­gy field and In­cyte has a flag­ship drug as well. Notes Porges:

In­cyte’s flag­ship prod­uct, Jakafi (rux­oli­tinib), is ap­proved in mul­ti­ple hema­to­log­i­cal in­di­ca­tions and ge­o­gra­phies and fits the pro­file of Gilead’s port­fo­lio and or­ga­ni­za­tion, par­tic­u­lar­ly since the demise of their own JAK in­hibitor, mo­melo­tinib. In­cyte has a promis­ing im­munother­a­py drug in late-stage de­vel­op­ment with epaca­do­stat, as well as a port­fo­lio of emerg­ing on­col­o­gy prod­ucts of un­cer­tain val­ue. Our pre­lim­i­nary analy­sis and il­lus­tra­tive merg­er mod­el in­di­cates that Gilead could af­ford to pay ~30-40% pre­mi­um ($173-187/share) for In­cyte and still gen­er­ate a ro­bust ~19% ac­cre­tion by year 5. Sim­i­lar­ly, our analy­sis in­di­cates that the trans­ac­tion could gen­er­ate a sig­nif­i­cant 11% in­ter­nal rate of re­turn (IRR) for Gilead share­hold­ers over the next ten years. This rate of re­turn is slight­ly high­er to the ex­pect­ed re­turn from our ear­li­er analy­sis of an ac­qui­si­tion of Ver­tex, and would amount to a suc­cess­ful de­ploy­ment of cap­i­tal, at least up to a price of $220/share.

The year got start­ed with a tremen­dous burst of en­thu­si­asm for the buy­outs to come this year. But M&A has large­ly been a bust, with big dis­trac­tions on tax re­form as well as an un­re­solved case of stick­er shock for every­thing on the mar­ket with a nice set of as­sets to in­spect. In the mean­time, a lit­tle on­line win­dow shop­ping will have to sub­sti­tute for the re­al thing.


Lessons for biotech and phar­ma from a doc­tor who chased his own cure

After being struck by a rare disease as a healthy third year medical student, David Fajgenbaum began an arduous journey chasing his own cure. Amidst the hustle of this year’s JP Morgan conference, the digital trials platform Medable partnered with Endpoints Studio to share Dr. Fajgenbaum’s story with the drug development industry.

What follows is an edited transcript of the conversation between Medable CEO Dr. Michelle Longmire and Dr. Fajgenbaum, and it is full of lessons for biotech executives charged with bringing the next generation of medicines to patients.

Christos Kyratsous (via LinkedIn)

He built a MERS treat­ment in 6 months and then the best Ebo­la drug. Now Chris­tos Kyrat­sous turns his sights on Covid-19

TARRYTOWN, NY — In 2015, as the Ebola epidemic raged through swaths of West Africa, Kristen Pascal’s roommates sat her down on their couch and staged an intervention.

“Are you sure this is what you want to be doing with your life?” she recalls them asking her.

Pascal, a research associate for Regeneron, had been coming home at 2 am and leaving at 6 am. At one point, she didn’t see her roommate for a week. For months, that was life in Christos Kyratsous’ lab as the pair led a company-wide race to develop the first drug that could effectively treat Ebola before the outbreak ended. For Pascal, that was worth it.

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Left to right, top to bottom: Carl Gordon, Adam Stone, Peter Moglia, David Schenkein, Robert Nelsen, Carol Gallagher; Srinivas Akkaraju, Ray Debbane, Jim Flynn, Peter Kolchinsky, Thilo Schroeder, Brad Bolzon

UP­DAT­ED: The top 100 bio­phar­ma ven­ture in­vestors at the mega­bil­lions deal ta­ble

The VC crowd took a step back last year, but nevertheless maintained a furious pace of new investments in therapeutic tech platforms and biotech startups. And the top 100 players completely dominated the megabillions game.

Just looking at the number of deals done by each of the top 100, OrbiMed came in at the top, with 20, followed by Alexandria (18), Perceptive (16) and the ubiquitous RA Capital at 16. It’s impossible to say exactly how much they invested in total — those numbers are only rarely provided — but it is clear from the numbers assembled by Chris Dokomajilar at DealForma who’s most likely to be found sitting at the table during the go-go days of biotech investing.

Dokomajilar tracked $14.06 billion in biotech venture investing last year, a dip from the frenzied pace of $16.02 billion in 2018 and more than $10 billion higher than he recorded for 2010, as the economy was recovering from a profound economic crisis.

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Rahul Ballal, Imara

As sick­le cell pa­tients find new op­tions, NEA-found­ed Imara pitch­es mid-stage al­ter­na­tive for $86M IPO

November 2019 proved to be a fruitful month for patients with blood disorders known as hemoglobinopathies. Within days, the FDA ushered two drugs for sickle cell disease and another for beta thalassemia to the market — livening up a barren field.

Imara, a relatively young plower, is riding on that enthusiasm as it shoots for an $86.25 million IPO.

Imara emerged from New Enterprise Associates’ orphan drug accelerator Cydan in 2016 as a single-product company. $77.3 million in private financing later IMR-687 remains the sole asset in its pipeline; the difference is the drug is now in Phase II for sickle cell disease, with topline data slated for later this year and two other mid-stage beta thalassemia studies lined up.

UP­DAT­ED: RA joins glob­al syn­di­cate to back a $98M round for CAN­bridge

A Beijing-based rare disease and oncology player has raised $98 million to help fund the expansion of its pipeline as well as a commercial portfolio.

CANbridge put out word Tuesday that the global private equity player General Atlantic joined forces with Chinese CRO Wuxi AppTec to lead the Series D, with both ready to chip in an extra $10 million each under the right conditions. The syndicate includes RA Capital Management, Hudson Bay Capital Management, YuanMing Prudence Fund and Tigermed.

Carol Robinson, Professor Dame Carol Robinson Research Group

UP­DAT­ED: Drug dis­cov­ery in HD: Ox­ford spin­of­f's mass spec­trom­e­try ap­proach scores fresh fund­ing

The technology used to detect explosives at airports — mass spectrometry — is being piloted as an engine for drug discovery.

Mass spectrometry is a tool designed to measure with profound accuracy the mass of a single molecule. Typically, mass spectrometers can be used to identify unknown compounds, to quantify known compounds, and to determine the structure and chemical properties of molecules.

Lars Fruergaard Jørgensen, chief executive officer of Novo Nordisk A/S, (via Getty Images)

The list of the 11 block­busters-to-be in line for a 2020 launch high­light agony and ec­sta­sy of drug R&D

For all the talk about unmet medical need and patients first and so on, the key criteria investors watch for any new drug in the pipelines is peak sales projection. Are you going to hit the blockbuster mark, at $1 billion-plus, or are you going to be an also-ran in the sales department?

Of course, analysts’ peak sales projections by themselves are of limited value in many cases. When the PCSK9 drugs started arriving 5 years ago, Repatha was billed as a $2.5 billion peak earner. They’re nowhere near that, with new competition threatening current levels. And if Biogen’s controversial Alzheimer’s drug aducanumab (submission planned but not on the list) is approved, per chance, will payers cover it?

Maybe not. And then those $10 billion in peak sales assumptions would go straight down the drain.

But, analysts are analysts, and peak sales projections have to be factored in when assessing the top experimental drugs up for a launch in the year ahead.

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UP­DAT­ED: Chi­na ap­proves flu drug be­ing tout­ed as a po­ten­tial coro­n­avirus treat­ment amid a rush of clin­i­cal stud­ies

One of the three drugs that China’s Ministry of Science and Technology has tapped as potential COVID-19 treatments to watch has notched its first Chinese OK — for the flu.

While there’s no proof yet that fapilavir, or favipiravir, is the cure that patients and physicians are yearning for, it stands out for a unique constellation of qualities. It’s been commercially available in Japan for several years (unlike Gilead’s experimental remdesivir) yet it’s new to China (unlike the malaria drug chloroquine phosphate). Perhaps more importantly, a domestic biotech — Zhejiang Hisun Pharma — owns the rights to manufacture and market the drug, preempting any concerns about patents.

FDA goes on high alert as coro­n­avirus rais­es threat to drug man­u­fac­tur­ing and clin­i­cal tri­als grind to a halt

The FDA isn’t quite sure just what the coronavirus outbreak in China will mean for the US pharma industry, but it has the potential to trigger a host of troublesome issues around the supply chain the country is directly plugged into.

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