With $460B in bor­row­ing ca­pac­i­ty, will any of the Big-20 bio­phar­mas go af­ter one of the top-5 takeover tar­gets?

Ge­of­frey Porges, Leerink

Leerink’s al­ways in­ter­est­ing Ge­of­frey Porges knows how to get your at­ten­tion. And noth­ing turns the head faster than a list of ma­jor league take­out tar­gets.

Now that Take­da has lined up its $62 bil­lion deal to buy Shire $SH­PG, with­out work­ing too hard to line up the mon­ey, Porges de­cid­ed to bring out the cal­cu­la­tor to see what in­dus­try lead­ers could do if they re­al­ly want­ed to buy Some­thing Big. And then al­so added a few key tar­gets that would get the bankers to stomp the ground in an­tic­i­pa­tion.

Just look­ing at in­cre­men­tal debt ca­pac­i­ty, Porges con­clud­ed: 

The com­pa­nies with the great­est in­cre­men­tal debt ca­pac­i­ty on the ba­sis of their pri­or trough ICR are AMGN ($17bn), CELG ($20bn), PFE ($19bn), MRK ($20bn), JNJ ($13bn), Roche ($45bn), GSK ($17bn), and SNY ($14bn). In to­tal, these com­pa­nies could is­sue $110bn in new debt (or de­crease their cash bal­ances via ac­qui­si­tions equiv­a­lent to $110bn), with the largest ca­pac­i­ty at GILD ($20bn) and RHH­BY ($23bn)….

On the ba­sis of in­cre­men­tal net debt/EBIT­DA to the group peak lever­age of 2.8x, the com­pa­nies that could take on the most in­cre­men­tal debt in­clud­ed AMGN ($33bn), BI­IB ($21bn), GILD ($38bn), AB­BV ($17bn), PFE ($41bn), MRK ($38bn), LLY ($19bn), JNJ ($66bn), Roche ($55bn), GSK ($21bn), NVS ($19bn), SNY ($21bn) and NO­VO ($25bn)…Based on this “peak in­dus­try lever­age” ap­proach analy­sis, a num­ber of com­pa­nies could po­ten­tial­ly is­sue over $30bn in new debt for such a trans­ac­tion, in­clud­ing AMGN, GILD, PFE, MRK, JNJ, and RHH­BY. 

Here’s Porges’ take on the top po­ten­tial buy­ers.

J&J: The phar­ma gi­ant’s last big hunt was for Acte­lion in ear­ly 2017. Porges says that the health­care con­glom­er­ate is primed and able to go up to $65 bil­lion on its own — sep­a­rate from tar­get-based fi­nanc­ing. That makes J&J, which has long had a taste for 10-fig­ure on­col­o­gy de­vel­op­ment pacts, a lead­ing con­tender for ma­jor M&A. Roche al­so reg­is­ters very high on the clout-o-me­ter, but the Swiss com­pa­ny has re­peat­ed­ly in­sist­ed it will lim­it it­self to bolt-ons.

J&J could be far more op­por­tunis­tic.

Roger Perl­mut­ter

Mer­ck: Mer­ck’s been re­serv­ing its fi­nan­cial fire­pow­er for al­liances like the $8.4 bil­lion one it scored with As­traZeneca on the PARP in­hibitor Lyn­parza. As a com­mer­cial al­liance, the phar­ma gi­ant didn’t have to wait to start cap­i­tal­iz­ing on the deal. But its R&D pur­chas­es have been much, much small­er, as re­search chief Roger Perl­mut­ter tends to stay tight­ly fo­cused on a few small­er things that get his at­ten­tion. Mer­ck, though, has the mus­cle to pow­er lift a ma­jor play­er in an ac­qui­si­tion. Its suc­cess in mov­ing Keytru­da to­ward the num­ber one slot in I/O hasn’t hurt, and could al­so per­suade in­vestors that di­ver­si­fi­ca­tion is good.

Pfiz­er: What big M&A list is com­plete with­out Pfiz­er? CEO Ian Read in­sists that the big deals can work, even as most of the in­dus­try hates them. Pfiz­er doesn’t mind go­ing hos­tile and has the most ruth­less rep for en­gi­neer­ing bru­tal re­struc­tur­ings that cost plen­ty of jobs. Still, the com­pa­ny hasn’t been sound­ing quite so bull­ish, less­en­ing the odds — un­less Read de­cides to cap his ca­reer with the big one.

Gilead: Gilead did one deal for Kite that helped calm down an­a­lysts look­ing for a new busi­ness to re­place the ail­ing hep C fran­chise, which is melt­ing away. Now some would like to see John Mil­li­gan go even big­ger. Nev­er count Gilead out. This ag­gres­sive com­pa­ny tends to do what it sets out to do.

Am­gen: CEO Bob Brad­way is due for a deal, and one that could out­shine the $10 bil­lion Onyx ac­qui­si­tion. The pipeline could use a late-stage boost and Brad­way is first and fore­most a num­bers guy. If the num­bers work, he’ll go big.

So what about po­ten­tial high-pro­file take­outs?

George Yan­copou­los

Re­gen­eron’s Len Schleifer and George Yan­copou­los have built one of the most ad­mired biotechs this side of Roche’s Genen­tech. Their R&D al­liance with Sanofi has been huge­ly pro­duc­tive, though the full com­mer­cial po­ten­tial hasn’t been re­al­ized, and they’ve proven able com­peti­tors against ri­vals like No­var­tis. Would in­no­va­tion stay high if a com­pa­ny like Pfiz­er came along? That’s doubt­ful. Match­ing an ide­al buy­er with an ide­al tar­get is rare in bio­phar­ma.

Bio­gen has been and will re­main a takeover tar­get, even as an­a­lysts push the com­pa­ny to go big as well on M&A. The late-stage neu­ro­sciences pipeline is light on cat­a­lysts and heavy on risk, but the MS leader has re­mained an ag­ile and po­tent play­er in its field. 

Take­da is on Porges’ list, but on a pre-Shire ba­sis. Once that deal goes through, who would want to buy Take­da? Astel­las, which is cur­rent­ly un­der­go­ing a ma­jor re­vamp un­der a new CEO, is al­so men­tioned. Maybe Astel­las will sur­prise every­one and do a deal along the lines of a Shire buy­out.

Alex­ion is al­so on every­one’s top-5 list of takeover tar­gets. It has a block­buster drug on the mar­ket and a fol­low-up that can help ex­tend fran­chise val­ue. The com­pa­ny is al­so on the hop, look­ing to make a leap in­to the Boston hub as new CEO Lud­wig Hantson re­builds the pipeline af­ter start­ing over on the top ex­ec­u­tive crew. 

Hal Barron, GSK

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Just ahead of GlaxoSmithKline’s Q2 update on Wednesday, science chief Hal Barron is making the rounds to talk up the pharma giant’s late-stage strategy as the top execs continue to woo back a deeply skeptical investor group while pushing through a whole new R&D culture.

And that’s not easy, Barron is quick to note. He told the Financial Times:

I think that culture, to some extent, is as hard, in fact even harder, than doing the science.

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Aca­dia is mak­ing the best of it, but their lat­est PhI­II Nu­plazid study is a bust

Acadia’s late-stage program to widen the commercial prospects for Nuplazid has hit a wall. The biotech reported that their Phase III ENHANCE trial flat failed. And while they $ACAD did their best to cherry pick positive data wherever they can be found, this is a clear setback for the biotech.

With close to 400 patients enrolled, researchers said the drug flunked the primary endpoint as an adjunctive therapy for patients with an inadequate response to antipsychotic therapy. The p-value was an ugly 0.0940 on the Positive and Negative Syndrome Scale, which the company called out as a positive trend.

Their shares slid 12% on the news, good for a $426 million hit on a $3.7 billion market cap at close.

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Some Big Phar­mas stepped up their game on da­ta trans­paren­cy — but which flunked the test?

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Now in its third year, the nonprofit created a new set of standards with Yale School of Medicine and Stanford Law School to evaluate the track record on trial registration, results reporting, publication and data-sharing practice.

Busy Gilead crew throws strug­gling biotech a life­line, with some cash up­front and hun­dreds of mil­lions in biobucks for HIV deal

Durect $DRRX got a badly needed shot in the arm Monday morning as Gilead’s busy BD team lined up access to its extended-release platform tech for HIV and hepatitis B.

Gilead, a leader in the HIV sector, is paying a modest $25 million in cash for the right to jump on the platform at Durect, which has been using its technology to come up with an extended-release version of bupivacaine. The FDA rejected that in 2014, but Durect has been working on a comeback.

In­tec blitzed by PhI­II flop as lead pro­gram fails to beat Mer­ck­'s stan­dard com­bo for Parkin­son’s

Intec Pharma’s $NTEC lead drug slammed into a brick wall Monday morning. The small-cap Israeli biotech reported that its lead program — coming off a platform designed to produce a safer, more effective oral drug for Parkinson’s — failed the Phase III at the primary endpoint.

Researchers at Intec, which has already seen its share price collapse over the past few months, says that its Accordion Pill-Carbidopa/Levodopa failed to prove superior to Sinemet in reducing daily ‘off’ time. 

Cel­gene racks up third Ote­zla ap­proval, heat­ing up talks about who Bris­tol-My­ers will sell to

Whoever is taking Otezla off Bristol-Myers Squibb’s hands will have one more revenue stream to boast.

The drug — a rising star in Celgene’s pipeline that generated global sales of $1.6 billion last year — is now OK’d to treat oral ulcers associated with Behçet’s disease, a common symptom for a rare inflammatory disorder. This marks the third FDA approval for the PDE4 inhibitor since 2014, when it was greenlighted for plaque psoriasis and psoriatic arthritis.

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Francesco De Rubertis

Medicxi is rolling out its biggest fund ever to back Eu­rope's top 'sci­en­tists with strange ideas'

Francesco De Rubertis built Medicxi to be the kind of biotech venture player he would have liked to have known back when he was a full time scientist.

“When I was a scientist 20 years ago I would have loved Medicxi,’ the co-founder tells me. It’s the kind of place run by and for investigators, what the Medicxi partner calls “scientists with strange ideas — a platform for the drug hunter and scientific entrepreneur. That’s what I wanted when I was a scientist.”

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Af­ter a decade, Vi­iV CSO John Pot­tage says it's time to step down — and he's hand­ing the job to long­time col­league Kim Smith

ViiV Healthcare has always been something unique in the global drug industry.

Owned by GlaxoSmithKline and Pfizer — with GSK in the lead as majority owner — it was created 10 years ago in a time of deep turmoil for the field as something independent of the pharma giants, but with access to lots of infrastructural support on demand. While R&D at the mother ship inside GSK was souring, a razor-focused ViiV provided a rare bright spot, challenging Gilead on a lucrative front in delivering new combinations that require fewer therapies with a more easily tolerated regimen.

They kept a massive number of people alive who would otherwise have been facing a death sentence. And they made money.

And throughout, John Pottage has been the chief scientific and chief medical officer.

Until now.

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Vlad Coric (Biohaven)

In an­oth­er dis­ap­point­ment for in­vestors, FDA slaps down Bio­haven’s re­vised ver­sion of an old ALS drug

Biohaven is at risk of making a habit of disappointing its investors.

Late Friday the biotech $BHVN reported that the FDA had rejected its application for riluzole, an old drug that they had made over into a sublingual formulation that dissolves under the tongue. According to Biohaven, the FDA had a problem with the active ingredient used in a bioequivalence study back in 2017, which they got from the Canadian drugmaker Apotex.

Apotex, though, has been a disaster ground. The manufacturer voluntarily yanked the ANDAs on 31 drugs — in late 2017 — after the FDA came across serious manufacturing deficiencies at their plants in India. A few days ago, the FDA made it official.

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