$21B deal by Gilead, none by PhRMA: a BioCentury podcast

A transcript of the episode follows.

[00:00:00] Jeff Cranmer: After nearly 40 years as an independent company and a stock that's traded below $10 as recently as April Immunomedics is going out with a bang getting acquired by Gilead for $21 billion. Welcome to BioCentury this Week, I'm Jeff Cranmer, Executive Editor of BioCentury, and I'm joined by

[00:00:20] Steve Usdin: Steve Usdin, Washington Editor

[00:00:22] Paul Bonanos: and Paul Bonanos Associate Editor.

[00:00:24] Jeff Cranmer: Gilead isn't the only deal to start the week and another breast cancer deal, we have Merck partnering with Seattle Genetics in a deal that's $1.6 billion on any other day it would probably be our top story. We'll also be checking in with Steve on what is happening in Washington, there's an update on drug pricing, as well as a lot out of FDA. But first, Gilead. So Paul it's Gilead biggest deal ever at $21 billion. What would compel them to pay that much for a program that's just entered the market ?

[00:00:58] Paul Bonanos: It's a very high premium it's more than twice Immunomedics value at Friday's market close at $88 a share is the purchase price and moreover it's 10 times Immunomedics value, as recently as April 3rd. So what's happened since then... Well, Immunomedics drug that Gilead is getting it's called Trodelvy, it's an antibody drug conjugate with a target TROP2, generic name is sacituzumab govitecan gained FDA approval this spring to treat triple-negative breast cancer in a third line setting and that was on the second try. They had a Complete Response Letter in early 2019 related to some CMC issues. And then in July of this year some Phase III data came out confirming Trodelvy's efficacy with the survival benefit both progression free, and overall survival. So they've definitely had a good year so far and the share price has gone up. But as for the premium... we don't know yet to what extent there was a bidding process, some information about that will come out in a regulatory filing probably sometime this month, but most likely it was competitive and that drove up the price during the final stages. Gilead's done a lot of cancer deals this year. It acquired Forty Seven, and that's the biggest otherwise at, $4.9 billion. But they clearly wanted Trodelvy they'll be enough to pay a big premium.

[00:02:07] Jeff Cranmer: The largest of those deals until today was the March takeout of Forty Seven at $4.9 billion. So Paul, this product just entered the market. Immunomedics as reported two months of sales, totaling $20 million, what has to happen for this molecule to fulfill its potential in Gilead's hands?

[00:02:26] Paul Bonanos: It'll take a lot to justify the purchase price, but the triple-negative indication isn't the only one Immunomedics was going after. So the label expansions are going to be the key for Gilead to derive a value that's commensurate with the price it's paying. Immunomedics has been saying it may be able to submit Trodelvy for accelerated approval as soon as next year and another breast cancer indication, that's a hormone receptor positive HER2 negative population. And that may be even bigger for Trodelvy could drive it to peak sales in the $4 billion range, according to a consensus estimate I saw this morning. And then there are more cancer indications, bladder cancer, lung cancer, colorectal cancer, plus earlier lines of breast cancer, and also potentially some combinations with other agents immuno oncology agents and such that could prove very valuable to patients.

[00:03:14] Jeff Cranmer: So it's been a long strange history for this company, I think they launched in 1982. Can you fill us in on the journey that Immunomedics has had?

[00:03:22] Paul Bonanos: That's true 1982. Trodelvy didn't really emerge as its top priority until the middle of the last decade, the 2010s decade. Even from that time on its path to this point, to approval, and the acquisition was not straightforward either. There was that Complete Response Letter last year that created some ambiguity. And then this program was the center of a deal with another company Seattle Genetics in 2017 that wound up falling apart. One of Immunomedics shareholders, venBio, had challenged the wisdom of the deal and that resulted in a proxy battle that replaced some directors, and ultimately two members of the C-suite, including the CEO wound up resigning from the company. venBio thought that deal undervalued Trodelvy; it was for $250 million upfront plus, something like $1.7 billion in milestones. And I guess based on today's news, you could make a case that although a lot has happened since then, in the end, that deal did undervalue the company and the program considering it's just been bought for 10 times as much.

[00:04:24] Jeff Cranmer: Interesting stuff, didn't really expect 10 years ago for Gilead to become a cancer company, but I guess that's where we are now that the HIV and HCV franchises are still hanging in there, but that doesn't seem to be the focus for Daniel O'Day at this point.

[00:04:39] Paul Bonanos: No, they're nowhere near the $5 billion a quarter that the HCV franchise was bringing in at peak. And I think people were wondering for a long time what they would do specifically in cancer with all that money. They're committing 75% of their cash on hand to this deal, financing the rest with debt, but this is the big blow this year we said there are a lot of deals but this is the biggest by far.

[00:05:01] Jeff Cranmer: At least now people will stop calling on Gilead to do a big deal. Let's head over to Washington, there's been a lot going on it's changing every day almost, and it's been hard to keep up, but fortunately we have Steve Usdin who's just wrapped up our Back to School issue. So now he's free to think about the back and forth that's been going on between PhRMA and the Trump Administration, Steve what's the latest?

[00:05:26] Steve Usdin: The latest is President Trump signed an order, an executive order on Sunday, on the face of it will create what he calls most favoured nation status for Medicare drugs. The idea is that the United States would not pay more, at least Medicare would not pay more for drugs than the lowest price paid by any developed country. There's a lot of reasons to believe that this is unlikely to happen. There are legal hurdles, there are logistical hurdles, there are timing hurdles. It's certainly not having any time soon. And if it happens, at all, there'll be ways that drug companies can evade much of the blow. What I found out and what I reported this morning I think is even more interesting this was triggered by a decision by the PhRMA board last week to reject a deal that they had been negotiating with the White House. Remember President Trump in July when he announced his intention to do most favoured nation drug status said that he was going to put it on hold to give the industry a chance to negotiate a deal that would have the same kind of the effect but wouldn't be exactly that. Industry and the White House engaged in negotiations and they were close to a deal, at least that's what the PhRMA board believed. But then last week, a White House, chief of staff Mark Meadows came to PhRMA said the only way to make the deal go over the finish line would be for pharma to agree to pay for a discount cards for Medicare Part D recipients. So 25 million Americans would receive these cards that would give them a hundred dollars off on their out of pocket expenses for Part D drugs. The PhRMA board debated this, and there were people on the PhRMA board who were quite concerned that this would be perceived by Democrats and by voters to support Democrats as interfering in the election, basically that they would be giving Trump a goodie during the election as something that he would be able to use in the campaign. Ultimately the board decided that they couldn't go along with it because I didn't want to be perceived as interfering in the election.

[00:07:25] Jeff Cranmer: Thanks Steve, that definitely helps sort things out. What's happening with FDA and COVID vaccines?

[00:07:31] Steve Usdin: It's interesting, last week FDA put a on really big push to try to persuade the public that any decisions that they're going to make on emergency use authorizations or approvals of COVID-19 vaccines are going to be based on an independent review of the science, and aren't going to be influenced by politics. And it's not restricted to vaccines, they're also talking about therapies and diagnostics. Some of the top career officials at FDA signed on to an extraordinary statement, that was published in USA Today saying exactly that they would be independent. Peter Marks, participated in a webinar that the Duke Margolis Center for Health Policy convened along with former FDA commissioners: Mark McClellan, Peggy Hamburg, and Scott Gottlieb.

[00:08:17] He also made the case first for FDA's independence and for saying that the decision is gonna be based on an independent evaluation of the science.

[00:08:25] Jeff Cranmer: Yeah, that's Peter Marks, director of the Center for Biologics Evaluation and Research. And, as you reported last week, Steve, I think his big quote out of that meeting was "if we are going to do an emergency use authorization, it's going to be really like an emergency use authorization plus." And then, he went on to say "it would be closer to a BLA," which is certainly a full data package, pretty close to a full approval it sounds like

[00:08:55] Steve Usdin: It is, there are some details about the amount of information that companies have to provide about manufacturing, some administrative things, and also more critically the length of the followup data for a safety database that would be expected in the BLA that won't be in an emergency use authorization. I think the expectation is that if there is an emergency use authorization, that it will be limited to specific populations. The obvious ones would be healthcare workers, teachers, people who are on the front lines, maybe the elderly if the vaccines seems to be effective in the elderly, people who are at most risk. And that there would be requirements for companies to continue to gather data on a wider population, and that it would be gradually rolled out for broader populations over time.

[00:09:39] Jeff Cranmer: Marks also teased that there was some guidance that FDA was going to issue shortly. What should companies expect from that?

[00:09:47] Steve Usdin: I think there'll be more clarity about the efficacy standards and the amount of data that FDA is going to require. To me I think it's all aimed at trying to increase public confidence, and the best way to do that is by having the criteria for an emergency use authorization specified upfront. And then companies being required to put all of their data out there so that independent experts can evaluate it. First, they can evaluate whether the criteria that FDA has set are reasonable, and then second, they can evaluate whether the data that the companies have provided supports a decision based on those criteria.

[00:10:22] Jeff Cranmer: All right, that's about all we have time for this week. Paul, thanks for joining us, I look forward to reading your story in a little bit... I hope. And Steve's story is already up online about the PhRMA White House, toe to toe.

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