Days After Judge Overturns Merck & Co.-Gilead Lawsuit, Merck Acquires Bay Area's Afferent Pharma for $1.2 Billion

Published: Jun 10, 2016

Days After Judge Overturns Merck-Gilead Lawsuit, Merck Acquires Bay Area's Afferent Pharma for $1.2 Billion June 10, 2016
By Mark Terry, Breaking News Staff

Merck , headquartered in Kenilworth, New Jersey, announced today that it was acquiring San Mateo, California-based Afferent Pharmaceuticals for an upfront cash payout of $500 million of stock, and an additional $750 million based on various clinical and commercial milestones.

Afferent has two clinical candidates, AF-219 and AF-130, both of which selectively block P2X3 receptors. P2X3 receptors are associated with sensitization of certain sensory nerves, notably C-fiber adherents. AF-219 is currently in a Phase IIb clinical trial to treat refractory, chronic cough, as well as a Phase II trial in idiopathic pulmonary fibrosis (IPF) with cough. AF-130 just completed a Phase I trial and the company plans to push forward with Phase II trials in non-respiratory conditions.

Chronic cough is defined as lasting more than 8 weeks and is seen in about 10 percent of adults in the U.S.

“Afferent has pioneered the clinical development of novel investigational candidates selectively targeting the P2X3 receptor, an exciting area of research,” said Roger Perlmutter, president of Merck Research Laboratories, in a statement. “We look forward to advancing these innovative molecules for patients with conditions like chronic cough, an area of significant unmet medical need.”

This is the biggest deal Merck has committed to in over a year. In January 2015, Merck acquired Cubist Pharmaceuticals for $102 per share, a deal worth about $9.5 billion. More recent deals have been smaller, such as its January 2016 acquisition of IOmet Pharma for about $150 million.

Afferent was founded by Anthony Ford, Pappas Ventures, Third Rock Ventures, Domain Associates, New Leaf Venture Partners and Roche Ventures. The company’s chief executive officer, Kathleen Sereda Glaub, was previously the president of Plexxikon, which sold in 2011 to Daiichi Sankyo for around $935 million.

“This achievement is a reflection of the talent and hard work of the experienced Afferent team in advancing the science of P2X3 receptors and the clinical development of our novel therapeutic candidates,” said Glaub in a statement. “We are very pleased to enter into this agreement given Merck’s reputation for maximizing opportunities around novel mechanisms. This agreement with Merck creates significant value for Afferent shareholders while enhancing the potential of our portfolio to provide meaningful benefits to patients globally.”

This deal was announced only a few days after a federal judge threw out the patent infringement finding Merck had won, and overturned a $200 million jury award. The judge indicated that Merck had lied to one of its business partners and to the court, saying the company’s activities were “systematic and outrageous deception in conjunction with unethical business practices and litigation misconduct.”

The decision is a final twist in a case that started in 2013. Merck argued that its patents covered Gilead ’s hepatitis C drug, Sovaldi, and demanded royalties and licensing fees. Gilead turned down the request and sued to have Merck’s patents invalidated. The jury dismissed the argument and decided that Gilead should pay Merck $200 million, plus future royalties. Merck had sought $2 billion.

Gilead brought up Merck’s dealings with Pharmasset , the biotech company that created Sovaldi, which Gilead acquired in 2011 for $11 billion. Those dealings included, according to Judge Freeman, “lying to Pharmasset, misusing Pharmasset’s confidential information, breaching confidentiality and firewall agreements, and lying under oath at deposition and trial.” Much of her criticism was focused on Phillippe Durette, a now-retired patent attorney who worked for Merck.

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