September 8, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Although 2017 hasn’t been a particularly exciting year for biopharma mergers and acquisitions, the recent acquisition of Kite Pharma by Gilead Sciences has stimulated the possibility of more deals. Todd Campbell and Kirstine Harjes discussed two of the top possibilities in The Motley Fool’s Industry Focus Healthcare podcast. Here’s a taste.
Immuno-oncology has been big for a few years and unlikely to diminish any time soon. The leader in the CAR-T arena is Novartis , which recently had the first CAR-T product, Kymriah (tisagenlecleucel), approved by the U.S. Food and Drug Administration (FDA). For some time, Juno Therapeutics was the leader in CAR-T, but after several patient deaths in one of its CAR-T programs, it fell behind Novartis and Kite, although after refocusing its programs, is still a significant player.
Herjer noted, “On Kite’s acquisition, a bunch of the other CAR-T developers also had their share prices pip, which to me is very indicative that people think that some of these other smaller players might also get acquired.”
And Juno was one of them, with about a 40 percent increase over a few days. Campbell says, “Obviously, investors were extrapolating. ‘If Novartis gets their CAR-T approved, and Kite theoretically gets its approved in November, and Gilead just spent all this money acquiring Kite to be able to get that upside, and then Juno, Juno has these CAR-T drugs, too, and maybe those drugs will be even better. So, perhaps I should get involved with that!’”
So, on the possibility of somebody buying Juno with an eye to picking up CAR-T assets, who would the possible buyer be? Celgene is one name that comes up. A few issues with Juno, however, is that after shuttering its JCAR015 program and shifting to JCAR017, it’s pretty far behind Kite and Novartis. JCAR017 is an interesting drug and has the potential to be a so-called “next-generation CAR-T” that would be safer than its predecessors, but it’s so early in the game that the assertion hasn’t been proven yet. Also, with the recent price jump, it’s market cap makes it more expensive than it was, so companies may be a little leery of acquiring it at what they might perceive as a hyper-inflated price.
Mazor Robotics develops robotic surgical equipment for spine and brain procedures. Hajres noted that at first she thought Mazor was competing with Intuitive Surgical , which dominates robotic surgeries, but then realized that Intuitive focuses on gynecological, urology, and general surgery. She says, “So, what Mazor is improving the accuracy of surgeons when they’re doing these surgeries, it reduces complications, it minimizes the need for inner operative X-rays, which is great because that will lower the radiation doses that patients are exposed to, and it leads to a faster recover and less postoperative pain.”
Campbell ties it into payers. Medicare and Medicaid reimburse at fixed rates, “So, the more that hospitals can reduce, say, recovery times, get patients in, get patients out, avoid complications that may end up having them return to the hospital where they’re not likely to get reimbursed as much from Medicare and Medicaid, the better.”
It’s probably better for patients, too.
Campbell also feels that the company is at a bit of a tipping point, where there’s enough research and support for the advantages, “where more hospitals may go out and start buying these machines, which are relatively expensive machines. They can run $800,000 to $1,000,000. So, it’s a big investment for these hospitals and surgery centers. I think that’s what we’re seeing now. We’re seeing Mazor generate pretty rapid growth for its latest system, which is the Mazor X.”
So, is it for sale? Well, they note that Medtronic inked a deal last year with Mazor to use its sales staff to generate leads with surgeons. Harjes says, “This is a partnership that had initially the responsibility for the two of these two companies to both be marketing these machines through the end of this year. Then, it had some options that came at the end of the year. But, we actually just found out earlier this week, I believe it was, that Phase II of the agreement is already going to kick in, which means that Medtronic will take over the exclusive rights to distribute the Mazor X system, and it’ll also make another investment in the company.”
It’s also ahead of its schedule. The full marketing program wasn’t expected to start until February 2018. Medtronic likely sees Mazor as bolstering its spine platform, which includes implants and some of the components used during surgical procedures. Medtronic has $649 million in quarterly spine-related sales, and Mazor could meaningfully add to that, especially with Medtronic using its marketing clout worldwide.
According to Harjes, Major’s system is used in about 5,000 procedures in the U.S., but the total addressable U.S. market is 500,000. And that’s just the U.S. market.
Campbell says, “I don’t know if this is going to get to the size of an Intuitive Surgical. I think there’s a likelihood that at some point, Medtronic maybe just swoops in and buys up the company lock, stock and barrel. It’s already … as part of these deals, putting its money where its mouth is and buying shares in Mazor.”
