Drug Giants Making Googly Eyes At 2 Small Biotechs

Published: Sep 26, 2017

Drug Giants Making Googly Eyes At 2 Small Biotechs September 21, 2017
By Mark Terry, BioSpace.com Breaking News Staff

It hasn’t been a big year for mergers and acquisitions in the biopharma space this year. The biggest deal was Gilead Sciences ’acquisition of Kite Pharma for about $11.9 billion. As we head into the final quarter of 2017, investors are ever-eager for an end-of-year buying binge. Although anything could happen, there are two biotech companies that most feel are prime targets.

“Acquisition of biotech companies by pharma is an important theme for the space,” Alan Carr, an analyst with Needham, wrote in a note to investors. “We believe late development-stage and commercial-stage biotech companies are particularly attractive acquisition targets, in part due to reduced risk.”

1. Theravance Biopharma

With headquarters in Dublin Ireland, Theravance Biopharma ’s first commercial product is Vibativ (telavancin), a once-daily dual-mechanism antibiotic for difficult-to-treat infections. In its pipeline, it has Revefenacin (TD-4208), a long-acting muscarinic antagonist being developed for chronic obstructive pulmonary disease (COPD). It also has a neprilysin (NEP) inhibitor program for a range of cardiovascular and renal diseases, including acute and chronic heart failure, hypertension and chronic kidney diseases such as diabetic nephropathy. It also has an inflammation and immunology program.

Yesterday, Theravance announced that GlaxoSmithKline and Innoviva reported positive results from the Phase III IMPACT trial of Trelegy Ellipta, the first and only once-daily single inhaler triple therapy. Theravance noted in a statement, “Trelegy Ellipta is a drug development program for which Theravance Biopharma has an economic interest in future payments that may be made by GSK or one of its affiliates pursuant to its agreements with Innoviva (formerly Theravance, Inc.). Theravance Biopharma is entitled to receive an 85 percent economic interest in the royalties paid by GSK on worldwide net sales. Those royalties are upward-tiering from 6.5 percent to 10 percent.”

Carr believes Theravance would be an attractive acquisition for big companies like Amgen , Eli Lilly and Teva Pharmaceutical , although he has a list of 21 companies that might be interested.

Theravance is currently trading for $33.56.

2. Exelixis

Based in South San Francisco, Exelixis focuses on developing and marketing small molecule therapies for cancer. Its big drug is Cabometyx. Over the last three years, company stock has grown almost 550 percent.

Recently the company shares dropped after Bristol-Myers Squibb halted a late-stage clinical trial of Opdivo and Yervoy in first-line renal cell carcinoma (RCC) earlier than expected because of positive results. Investors were concerned how the Opdivo/Yervoy combo would impact sales of Cabometyx.

Yet Keith Speights, writing for The Motley Fool, pointed out that per clinical data, Cabometyx still looks like a better treatment. And secondly, Bristol-Myers’ combo therapy will likely be priced higher than Cabometyx if it gets approved as a first-line treatment for RCC. The Opdivo/Yervoy combo currently costs $265,000 per year for melanoma. Cabometyx is priced at about $156,000. With the drug being both cheaper and more effective, payers are probably going to direct patients and providers towards Cabometyx.

Speights wrote earlier this month, “Also, don’t overlook the potential for Cabometyx in combinations of its own. BMS is evaluating the drug in combination with Opdivo and/or Yervoy in treating RCC. Don’t be surprised if one of these combos proves more effective than anything else. In addition, Exelixis is studying a combination of Cabometyx and Roche ’s Tecentriq in treating bladder cancer and RCC. Regardless of what happens, Exelixis wins.”

Speights argues that the drop in Exelixis stock price makes it a good buy opportunity for investors. That would likely extend to big pharma interesting in buying into an oncology company.

Exelixis is currently trading for $28.14.

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