Healthcare Megatrends: How will Megatrends Impact Healthcare Deals?

Sharon Finch, CEO Medius Associates

Based on Medius monthly review of pharma deals which captures the top deals by public headline value plus other deals of note. 

We include deals in the month of announcement and typically update on closure.

HEADLINE VALUESAs frequently quoted in press releases, based on the sum of initial [upfront / signature] payments, option fees, R&D funding, development milestone payments, sales threshold and other success or contingent payments, as cash or equity.  This does not typically include royalty payments.

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• Deal economics and payer pricing • Telemedicine: the expectations from future

technologies • Innovation gaps and sourcing new opportunities

– from NGOs and universities • Competitive nature of finding new technologies

– following the crowd, chasing emerging indications• Adaptations in deal structures

– e.g. joint ventures and co developments

Outline

Megatrends are sustained, global, social, economic, political, environmental ortechnological changes. These trends will make a considerable and durable impact on thehealthcare environment by creating new opportunities, challenges and risks.

regulation

PE &VC

Pharma macro environment

tax inversions

market accesspricing

politics Brexit, Trump

low interest ratesR&D

Man.ftgdigital health 

&telemedicine

difficult areas e.g. Alzheimer’s 

PLAYERS

emerging therapy areas

Asset swaps 

new entrantsIT | NGOs 

DEAL TERMS & STRUCTURES

biotech DD pharma

spin outs

2016 data: deal economics

Acquisition Values US $bn 2013 2014 2015 2016 change

DW top 20 acquisitions 159.7 296.3 276.6 114.9 -58%

Excluding outliers2015 Allergan/Pfizer $160bn2016 Shire/Baxalta $ 32bn

116 83 -28%

Licensing Deal Values US $bn 2013 2014 2015 2016 change

DW top 20 licensing deals 18.2 27.5 28.8 34.3 +19%

Excluding outliers2015 Hanmi/Sanofi $4.2bn2016 Heptares/Sosei $3.3bn;

Merus/Incyte $3.0bn

24.6 28.0 +14%

Megatrends: economic

Key deal trends 2016

• Decline in volume / value of deals?– is it now time for companies to consolidate?

• Investment in digital and tele medicine via joint ventures

• Continuing appetite for opportunities in the immuno-oncology space

• Growing interest in new indications for example NASH

• Risk sharing approaches deployed– widespread use of options – co-developments between major pharma

Megatrends: sustained, global, social, economic or technological changes.

Evaluate data shows M&A and partnering deals in decline in 2016.

Based on Q3 2016 results published by Mergermarket for pharma and biotech, the cumulative deal value could be around 30% less than last year in spite of major M&A deals.

Role of market forces

*prediscount

Megatrends: economic, political

• published studies compare all-oral, direct-acting antiviral (DAA) regimens to previous SoC (usually IFN) to calculate incremental cost effective ratios (ICERs).

• treating patients with more advanced fibrosis/ cirrhosis provided better value • treatment-naïve patients are generally within the range of other therapies. • cost-effectiveness is difficult to judge due to changes in available drugs, cost

variability and patient characteristics e.g. fibrosis stage, comorbidities, HCV genotype

Company Product Price $

Gilead Harvoni 94,500

Gilead Sovaldi 84,000

AbbVie Viekira Pak 83, 319*

AbbVie Technivie 76,653

Gilead Epclusa 74,500

J&J Olysio 66,360

BMS Daklinza 63,000

Merck Zepatier 54,600

• May 2007 Mylan acquired EpiPen as part of Merck KGaA’s generics business

• from 2009 price increased by 400% to $650• Oct 2016 $465m settlement to DoJ for overcharging • Cigna dropping coverage of EpiPen in favour of CVS

Health/Impax Labs Adrenaclick [$110]• Re launch of AUVI-Q rival product from Kaleo $0 /

$360

"Mylan is now looking at price increase issues through a patient lens." 

Pricing of Hepatitis C products

Payer pricing

• Pricing limitations for rare diseases: – Biogen’s Spinraza was approved in Dec 2016 for the

treatment of spinal muscular atrophy [SMA] an ultra rare disease

– Cost p.a. will be $750k for the first year, $375k for subsequent years.

• This compares with other ultra-orphan disease therapies e.g. Alexion’s Soliris, that has a list price of $500k pa.

Megatrends: economic, political

Region SMA Patients

USA 9,000

EP 10,000

Japan 1,000

Digital healthcare | Telemedicine

• Fitness and well being• Diagnosis and monitoring• Therapeutics• Health care delivery and

support

Megatrends: social, economic, political, technological

New players are bringing in new approaches• Amazon: wearable technology portal which covers

products across the wellness spectrum • Google: telehealth pilot scheme with Scripps Health

“talk to a doctor now” • UberHEALTH: on demand flu prevention packs

Approaches via partnerships/JVs

• Formation of Galvani Bioelectronics for the R,D&M of bioelectronic medicines.

• The parent companies contribute background IP and investment of up to £540 m over 7 years, subject to completion of certain milestones

• GSK hold a 55% equity and Verily hold 45%.

• Onduo JV formed by Sanofi and Verily• Blending digital disease-management

and expertise with Sanofi’s diabetes research and products

• Taking Sanofi beyond the pill and supporting its diabetes franchise.

• Each party contributed ~ $248 m capital contribution

NB. Verily has sold a minority stake to Singapore’s National Wealth Fund, Temasek, for $800m.

Formation of Verb Surgical Inc with J&J’s Ethicon subsidiary to develop robotic surgery.

Future technologies• Novartis deal with Google signed in 2014

for smart lens • Appearance in the clinics for correction in

age-related long sightedness has been delayed

Digital healthcare and telemedicine• Investments often made through venture arms; e.g. Merck Global

Health Innovation Fund has investments in a range of companies e.g. Navigating Cancer, WellDoc and Healthsense

• Amgen similarly building its digital health capabilities with investment in eHealth Ventures a digital health incubator

• Pfizer has invested in AMRA, for the transformation of images from a whole body MRI into fat and muscle measurements

• Roche investment in Flatiron Health which gathers data on cancer treatments and sells software based on that analysis

• In partnership with mySugr launched a diabetes management app Accu-Chek Connect

• Acquisitions: Genia sequencing company for genetic testing and Bina Technologies big data platform for processing next generation sequencing (NGS) data [genomic and processing data]

• Exclusive distribution with Senseonics for an implantable continuous glucose monitor, Eversense.

Megatrends: social, economic, political, technological

Licensor Acquired

Licensee Acquirer

Product / Technology

EarlySense AmericanWell

Continuous monitoring and American Well's consumer telehealth service Amwell

IBM Watson Health

Illumina Access to the BaseSpace Sequence Hub and tumour sequencing process to expand access to genomic data

Palantir Merck Big data to help Merck combine its research with other bioinformatics on specific cancer patients

Illumina Philips sequencing technology and BaseSpace Sequence Hub with Philips' cloud-based IntelliSpaceGenomics clinical informatics platform

Glooko Novo Nordisk non-exclusive collaboration for joint development co branded diabetes digital health solutions

Digital healthcare and telemedicine deals

Megatrends: impact on the healthcare landscape

Decline in innovation

• 36 applications made [average 35]• CRLs were issued in response to 12 BLA/NME

applications received during 2016– in comparison only 2 CRLs were issued in

2015• 5 were given breakthrough designation• 13 were approved under priority review

Megatrends: economic, political

year ApprovalsFDA EMA*

2016* 22 812015 45 932014 41 82

*includes generics

FDA held over from 2016: Roche's Ocrevus (ocrelizumab) for MS [additional data submitted] Sanofi/Regeneron sarilumab for RA ["certain manufacturing deficiencies“]

Deloitte: returns on R&D investment at the top 12 pharma companies fell to 3.7% for 2016 from 10.1% in 2010

Finding new therapeutic areasFishing in a smaller pool increases competition and the potential for overlap.

Megatrends: technological

• To settle the Keytruda patent infringement Merck are to pay an initial $625m to BMS/Ono with 6.5% royalty until 2023 reducing to 2.5% until 2026

• Judgement that Gilead should pay $2.54 bn to Merck [10% royalty] for sales of Harvoni and Sovaldi

• Gilead and AbbVie closed a settlement agreement for Harvoni, terms of which are not disclosed

• Amgen was granted an injunction blocking sales of Sanofi/Regeneron’s Praluent [alirocumab], a PCSK9 inhibitor, an appeal is planned

• CRISPR UCal & U of Vienna vs MIT [Broad Institute] & Harvard• Ownership issues / first to file/invent issues• Partnerships aspects: Novrtis, Intellia, Editas

Universities join the top headline deals*

• Univ. of Pennsylvania closed a $2bn headline deal with Biogen for the development of gene therapies to treat eye, skeletal muscle and central nervous system disorders using adeno-associated virus [AAV] gene delivery vectors.

• Under the agreement Biogen has the option to rights to the University's next generation AAV vectors.

• University receives an upfront of $20m plus $62.5m in R&D funding, with a min of $77.5m in milestone fees per programme plus royalties.

• In oncology, Chugai signed with Osaka Univ. for a multiyear investment worth $91.1m to focus on the development of treatments.

• This follows a similar collaboration between Takeda and Kyoto Univ. [April 2015] with $268m going into stem cell treatments.

*DW May 2016:

Licensor Acquired /Licensee Acquirer

Product / Technology Deal Type Headline (upfront) $m 

Tobira Therapeutics/ Allergan

Lead compound cenicriviroc (p3 ready) and evogliptin(p1) 

Company acquisition 1,695 (595)

Nimbus Apollo/ Gilead Sciences

NDI‐010976, acetyl‐CoA carboxylase inhibitor programme (p1) and back‐up compounds (pc)

Company acquisition 1,200 (400)

Conatus / Novartis Emricasan, orally active pan‐caspase inhibitor (p2b); inc$15m loan

collaboration, option to license, investment

72+ (50) + 7 on option exercise 

Dong‐A/ Tobira Therapeutics

Evogliptin (approved in Korea for type 2 diabetes) in combination with cenicriviroc for NASH and as single agent; rights for N. America, EP, Australia

collaboration/ cross licence

71.5 (1.5)

Tobira Therapeutics/ Dong‐A

Cenicriviroc (p2 for NASH) in combination with evogliptin for NASH + as single agent; rights for Korea 

collaboration/ cross licence

3 (0.5)

Synta Pharmaceuticals/ Madrigal

Madrigal’s MGL‐3196, a selective thyroid hormone receptor‐ß (THR‐ß) agonist for NASH

Merger 61 

Akarna Therapeutics/ Allergan

AKN 083, farnesoid X receptor (FXR) agonist (pc) Company acquisition 50+ (50)

Galmed / Samil Pharm Aramchol, a conjugate of cholic acid and arachidic acid (p2b), rights for Korea

licence 8.1 (2.1)

Arcturus Therapeutics/ Takeda

RNA therapies for NASH based on Arcturus' chemistry and LUNAR nanoparticle platform 

collaboration nd

Harvard Fibrosis Network/ Boehringer Ingelheim

Collaboration to explore pathways and molecular targets for treatment of fibrotic diseases inc. NASH

collaboration nd

Mayo Clinic/ SeresTherapeutics

Discovery of microbiome therapeutics for primary sclerosing cholangitis (PSC) and NASH

collaboration nd

NASH deals closed in 2016

Licensor Licensee Deal type Product Headline

Ariad Pharmaceuticals

Takeda Company acquisition oncology portfolio iclusig for CML and ALL

5,200

Pieris Pharmaceuticals

Servier Exclusive licence ex USA PRS 332 PD-1-targeting bispecific checkpoint inhibitor and 4 other candidates.

1,700

Merrimack Pharamceuticals

Ipsen Acquisition of product portfolio

Onivyde irinotecan liposome injection

1,025

Immatics Amgen Licence and joint development

next-generation, T-cell engaging bispecific immunotherapies targeting multiple cancers

1,000

Valeant Sanpower Group Divestment of equity interest in Dendreon

Provenge, a personalized immunotherapy for prostate cancer

820

BMS Ono Merck Patent settlement PD-1 antibody Keytrudapembrolizumab

625

Domain Theapeutics

Merck KGaA Research collaboration licence

next-generation adenosine receptor program to partner with checkpoint inhibitors

258

Vertex Merck KGaA Collaboration VX 970 VX 803 and 2 others ATR inhibitors

230

Azaya Cytori Company acquisition Doxorubicin ATI 0918 liposomal nanoparticle technology platform

160

Maverick Takeda Option to acquire the company

Tcell platform to improve the utility of T-cell redirection therapy

125

Oncology/immuno‐oncology deals in January 2017

Spin outs

Megatrends: impact on the healthcare landscape

• Biogen has spun out a new fully independent company Bioverativwith a focus in non-cancer blood disorders with R&D focused on new therapies in haemophilia and sickle cell disease

• Funded with $325m support from Biogen• Has product sales via Eloctate and Alproix for haemophilia A and

B• Includes pipeline projects:

– BIVV-001 a molecule which is a Factor VIII drug [similar to Eloctate]

– BIVV-002 a Factor IX molecule– XTEN half-life extension tech bought from Amunix for

Bioverativ, – Future work on gene therapy approaches to haemophilia

More spin outs!

Megatrends: impact on the healthcare landscape

• Novartis passed on 3 off strategy projects to new company Mereo which is being launched with $119 m financing

• development will be conducted by the CRO Icon.• Novartis secured equity in the company with a promise of

funds for future development • the company is backed by Woodford Investment

Management and Invesco-• Mereo gains access to

– BPS-804, an antibody which has been in development for brittle bone syndrome (osteogenesis imperfecta), an orphan condition.

– BCT-197, an oral p38 MAP kinase inhibitor for COPD.– BGS-649, a testosterone drug that's an oral

aromatase inhibitor for hypogonadotrophichypogonadism.

Keeping a watching brief: orphans• Companies are covering their bets in the orphan space often

investing through the venture arms of the business

• Minoryx secured funding from Roche’s venture funds as well as from Chiesi Ventures. The lead MIN-102 which targets X-linked Adrenoleukodystrophy (X-ALD), has just eceivedorphan designation

• Pfizer Ventures formed an orphan incubator [Cydan] which spun out its first company Vtesse with VTS 270 for NiemannPick type C1 disease

• Ovid signed a global collaboration with Takeda for clinical development and commercialization of Takeda’s TAK-935, a novel selective CH24H inhibitor, in rare pediatric epilepsies. TAK-935 has successfully completed P1

Megatrends: technological

Conclusions and predictions• The deal making trends seen from

2016 seem set to continue into 2017• Digital health will be a major area for

companies to make for exploratory deal investments

• Political uncertainty will not be quickly dispelled which may limit major M&A

• Product divestments will continue at a low level of activity

• New therapies will continue to drive the demand for early stage deals

Megatrends: sustained, global, social, economic, political, environmental ortechnological changes.

With thanks to the Deal Watch reporting team !

Jill Ogden Sharon Finch

Roger Davies Catharine Staughton