The Biggest Bargains Pharma Scooped Up in the Down Years
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headed for FDA approval and a mega-billion dollar future. But $11 billion is still a lot of money. The best bargain purchase Gilead made in the recession was of Seattle-based Calistoga Pharmaceuticals in 2011. By paying $375 million upfront and a maximum of $600 million with milestones, Gilead got ahold of what clearly appears to be a leader in the new class of PI3 kinase inhibitors for blood cancers. This drug, idelalisib, passed its first pivotal study in slow-growing non-Hodgkin’s lymphoma, and just nailed another Phase III trial in chronic lymphocytic leukemia. It has a clean side effect profile, and has the potential to be a high-priced chronic therapy. It has all the markings of a drug that could easily generate $1 billion plus in sales per year. A competitor now a couple years behind idelalisib in development, Cambridge, MA-based Infinity Pharmaceuticals (NASDAQ: INFI), is worth more than $700 million largely on the promise of its PI3k drug.
Bristol-Myers Squibb/Medarex: It is still a bit early to call, but this might be the best bargain acquisition ever in the biotech industry. By paying $2.4 billion in September 2009 for Princeton, NJ-based Medarex—a price many investors thought too high—Bristol-Myers got ahold of what now appears to be a trailblazing cancer immunotherapy franchise. Bristol-Myers got ipilimumab (Yervoy), which releases a molecular brake on the immune system, enabling it to better attack tumors. The drug extended survival time in melanoma patients and won FDA approval in March 2011. The drug generated more than $700 million in sales in 2012, its first full year on the market. But that’s only the beginning. Bristol also got ahold of drug candidates against PD-1, which removes a cloaking mechanism tumors use to hide from the immune system. Cancer physicians are super-excited about this whole new class of immunotherapies, which have shown signs of working against multiple tumor types and providing long-term remissions. It’s not far-fetched to think that Bristol-Myers could generate $10 billion a year plus in sales from its cancer immunotherapies five years from now. In that light, a $2.4 billion purchase is a jaw-dropping bargain.
Celgene/Avila Therapeutics: This one might be a bit early to call, because I haven’t yet seen clinical trial data to absolutely prove the worth of the BTK inhibitor that Summit, NJ-based Celgene (NASDAQ: CELG) got from Bedford, MA-based Avila Therapeutics. But it is clear that a competing BTK inhibitor for blood cancers from Pharmacyclics (NASDAQ: PCYC) has generated terrific clinical results, and turned Pharmacyclics from an industry nobody into an emerging company worth $9 billion. And oh yeah, how much did Celgene pay for its competing BTK inhibitor? It paid $350 million upfront, plus $575 million in milestone payments, for a potential grand total of $925 million. And, it’s worth noting that Boulder, CO-based Clovis Oncology got one of its most important assets for lung cancer from Avila. Clovis is worth $1.6 billion, largely on the promise of this drug, CO-1686.
Takeda Pharmaceuticals/Intellikine: It’s early, but it’s hard for Takeda to go wrong on this one. Takeda paid the ultra-cheap price of $190 million upfront, plus another $120 million in milestones, to get San Diego-based Intellikine. This was a prolific drug discovery shop focused on all kinds of variations on inhibiting the PI3 kinase pathway. Intellikine licensed one of its PI3k inhibitors to Infinity. If Infinity (market value—$700 million) is successful in getting this drug to the market, Takeda will be in line to collect royalties that could be worth way more than the price it paid for Intellikine. Takeda also got a lot more than just one drug candidate from Intellikine, although it’s too early to say with real certainty what any of them are worth.
Roche/Genentech: I’m going on a limb on this one, because anytime a company pays $46.8 billion for a minority ownership stake of anything, it’s hard to call it a bargain. But when Switzerland-based Roche pulled the trigger on this megadeal in March 2009, it got the biotech industry’s crown jewel and the world’s No. 1 cancer drug franchise. It’s still pretty early to truly judge this deal in historic terms, but Genentech has continued to deliver big innovations with trastuzumab emtansine (Kadcyla), pertuzumab (Perjeta), and now the coming ‘son of Rituxan’ still known as GA101. Genentech hasn’t fulfilled the most bullish expectations for its blockbuster bevacizumab (Avastin) in every form of cancer under the sun, but it’s not a bust, either. The company has managed to retain much of its scientific firepower, and it’s now more than just an oncology company, with its sights set on big long-term challenges in neuroscience, like Alzheimer’s. I think historians 20 years from now will say Roche got quite a bargain with its takeover of Genentech. “It’s the goose that keeps laying golden eggs,” said David Lowe, CEO of Austin, TX-based Aeglea BioTherapeutics, a former partner with Skyline Ventures, and a former scientist at Genentech.