4:53 PM
Dec 30, 2016
 |  BioCentury  |  Finance

Delivering takeouts

25th annual Buyside View sees investors eyeing mid-cap M&A targets in 2017

BioCentury’s 25th annual Buyside View finds biotech investors focusing on mid-cap names with late-stage or marketed products that could become M&A targets.

“The main theme playing at the moment is investors like us are looking more and more to M&A plays rather than clinical data,” said HBM Partners’ Ivo Staijen. “That’s because we have had some pretty bad disappointments this year, and we haven’t seen any new big classes of drugs being launched since HCV.”

Even the large caps could be on the block, they say.

“If repatriation really happens, and we get access to overseas cash, I think it is not unreasonable to believe that some of the larger companies could go,” said ClearBridge Investments’ Marshall Gordon. “They wouldn’t go cheap, but you’d have the cash that you’ve been struggling to get at for a long time.”

The buysiders’ picks for 2017 fall into therapeutic areas including some old favorites and some newcomers, with investor interest driven by diverse factors ranging from competition in the clinic to reimbursement risk.

Appetite remains strong for immuno-oncology even as the sheer volume of combination regimens in the clinic means sifting out winners will continue to pose a challenge. A few investors expect additional clarity this year on agents that could complement PD-1 or PD-L1 inhibitors.

Investors are also anticipating possible first FDA approvals for CAR T therapies from Novartis AG and Kite Pharma Inc. and a gene therapy from Spark Therapeutics Inc., which would shed light on how the market will respond to pricing for novel therapeutic modalities with curative potential.

Keeping with the pricing theme, several buysiders are following data from rare disease plays, which they believe remain immune to downward pricing pressure.

“It is not unreasonable to believe that some of the larger companies could go.”

Marshall Gordon, ClearBridge

A new space on the buysiders’ radar is CNS disease. Multiple investors noted clinical readouts and regulatory actions in the coming year could attract pharma acquirers looking to gain an edge in broad indications with high unmet need, including Parkinson’s disease, Alzheimer’s disease and migraine.

Large cap players are also expected to continue reporting milestones that could drive long-term growth. The most notable of these are the cardiovascular outcomes data for Amgen Inc.’s Repatha evolocumab and Praluent alirocumab from Sanofi and Regeneron Pharmaceuticals Inc.

Positive data could lead to a commercial boost for the PCSK9 inhibitors and provide a positive read-through for other cholesterol-lowering compounds in the clinic.

Sifting combos

Most investors named immuno-oncology combinations as a continuing therapeutic theme for 2017, and a few believe the coming year could reveal leading combination mechanisms.

Loncar Fund’s Brad Loncar, OrbiMed Advisors’ Sven Borho and Gordon are following AstraZeneca plc’s Phase III MYSTIC study evaluating PD-L1 inhibitor durvalumab with or without anti-CTLA4 mAb tremelimumab as a first-line therapy for non-small cell lung cancer (NSCLC) patients regardless of PD-L1 status. Data are due in 1H17.

“If that’s positive, it could be a real needle mover for AZ,” said Loncar. “One of the biggest events [in 2016] was Opdivo failing in that first-line setting.”

In August, Bristol-Myers Squibb Co. reported Opdivo nivolumab missed its primary endpoint in the Phase III CheckMate -026 study in first-line NSCLC. The company remains $16.88 (22%) below its close of $75.32 on Aug. 4, before the data were announced.

Rival PD-1 mAb Keytruda pembrolizumab from Merck & Co. Inc. gained FDA approval in October as a first-line treatment for NSCLC patients, but the label is limited to patients whose tumors express PD-L1.

“It is too early to call a winner there, and we haven’t positioned ourselves really in any particular molecule yet.”

Ivo Staijen, HBM Partners

Incyte Corp. remains a popular pick and was named by four investors as a take-out target. Buysiders expect incremental Phase I/II data in 2017 from epacadostat (INCB24360), an inhibitor of indoleamine 2,3-dioxygenase (INDO; IDO), in combination with multiple PD-1 or PD-L1 inhibitors.

Borho is watching for Phase I/II lung cancer data from the various epacadostat combos, while Medical Strategy GmbH’s Mario Linimeier looks forward to data from the Phase III ECHO-301 trial of epacadostat plus Keytruda in melanoma, which is due to read out in 2018.

EcoR1 Capital’s Oleg Nodelman likes Bristol-Myers Squibb Co.’s combination of Opdivo with FPA008, a colony stimulating factor 1 receptor (CSF1R; CD115) antibody licensed from Five Prime Therapeutics Inc. The combination is in a Phase Ia/b study in NSCLC, melanoma, squamous cell cancer of the head and neck (SCCHN), pancreatic cancer, colorectal cancer and glioblastoma multiforme (GBM).

However, Staijen and Bain Capital’s Daniel Krizek are hesitant to make predictions on winning combinations.

“That’s a bit of a minefield for me,” said Staijen. “It is too early to call a winner there, and we haven’t positioned ourselves really in any particular molecule yet.”

Table: 2017 milestones

Selected products with clinical milestones or regulatory submissions expected in 2017. Source: BCIQ: BioCentury Online Intelligence

AbbVie Inc. (NYSE:ABBV) / Enanta Pharmaceuticals Inc. (NASDAQ:ENTA)Glecaprevir/pibrentasvir (ABT-493/ABT-530)Chronic HCV genotypes 1-6 infectionSubmit MAAEarly 2017
Ablynx N.V. (Euronext:ABLX)CaplacizumabThrombotic thrombocytopenic purpura (TTP)Submit MAA; Ph III dataEarly 2017; 2H17
AcelRx Pharmaceuticals Inc. (NASDAQ:ACRX)Zalviso sufentanilModerate to severe acute pain in a hospital settingPh III data; resubmit NDA3Q17; 4Q17
AcelRx Pharmaceuticals Inc. (NASDAQ:ACRX)ARX-04 (sufentanil sublingual tablet)Moderate to severe acute pain associated with trauma or injurySubmit MAA1H17
Aclaris Therapeutics Inc. (NASDAQ:ACRS)A-101Seborrheic keratosisSubmit NDA; submit MAA1Q17; mid-2017
Active Biotech AB (SSE:ACTI) / Teva Pharmaceutical Industries Ltd. (NYSE:TEVA)LaquinimodRelapsing-remitting multiple sclerosis (RRMS)Ph III data1H17
Aerie Pharmaceuticals Inc. (NASDAQ:AERI) Rhopressa netarsudil ophthalmic solution 0.02%Intraocular pressure (IOP) in glaucoma and ocular hypertension patientsResubmit NDA1Q17
Aerie Pharmaceuticals Inc. (NASDAQ:AERI) Roclatan netarsudil/latanoprostIOP in glaucoma and ocular hypertension patientsSubmit NDAYE17
Aeterna Zentaris Inc. (TSX:AEZ; NASDAQ:AEZS)Macrilen macimorelin acetateDiagnose adult growth hormone deficiency Top-line Ph III data; submit NDAEarly 2017; 1H17
Aeterna Zentaris Inc. (TSX:AEZ; NASDAQ:AEZS) / Orient Europharma Co. Ltd. (TPEx:4120)Zoptrex zoptarelin doxorubicinEndometrial cancerTop-line Ph III data; submit NDA1Q17; 2017
Agios Pharmaceuticals Inc. (NASDAQ:AGIO)AG-120Isocitrate dehydrogenase 1 (IDH1) mutant-positive acute myelogenous leukemia (AML)Submit NDA2017
Albireo Pharma Inc. (NASDAQ:ALBO) / EA Pharma Co. Ltd.Elobixibat Chronic constipationSubmit NDA in Japan1Q17
Alder BioPharmaceuticals Inc. (NASDAQ:ALDR) Eptinezumab (ALD403)Episodic migrainePh III data1H17
Almirall S.A. (Madrid:ALM) / Sun Pharmaceutical Industries Ltd. (BSE:524715; NSE:SUNPHARMA) / Merck & Co. Inc. (NYSE:MRK)TildrakizumabModerate to severe chronic plaque psoriasisSubmit MAA2Q17
Alnylam Pharmaceuticals Inc. (NASDAQ:ALNY) / Sanofi (Euronext:SAN; NYSE:SNY)PatisiranHereditary transthyretin (hATTR) amyloidosisTop-line Ph III data; submit MAA and NDAMid-2017; late 2017
Amgen Inc. (NASDAQ:AMGN)Repatha evolocumabDyslipidemiaPh III FOURIER data1Q17
Amgen Inc. (NASDAQ:AMGN) / Novartis AG (NYSE:NVS; SIX:NOVN)ErenumabPrevent episodic migraineSubmit reg app2017
Aquinox Pharmaceuticals Inc. (NASDAQ:AQXP)AQX-1125Bladder pain syndrome (BPS)/interstitial cystitisTop-line Ph III LEADERSHIP 301 data4Q17
Ardelyx Inc. (NASDAQ:ARDX)Tenapanor Irritable bowel syndrome with constipation (IBS-C)Ph III dataMid-2017; YE17
Ariad Pharmaceuticals Inc. (NASDAQ:ARIA)BrigatinibMetastatic ALK-positive non-small cell lung cancer (NSCLC)Submit MAAEarly 2017
ArQule Inc. (NASDAQ:ARQL) / Daiichi Sankyo Co. Ltd. (Tokyo:4568) / Kyowa Hakko Kirin Co. Ltd. (Tokyo:4151) TivantinibHepatocellular carcinoma (HCC)Top-line Ph III METIV-HCC data1Q17
Array BioPharma Inc. (NASDAQ:ARRY) / Laboratoires Pierre Fabre S.A.Binimetinib plus encorafenibBRAF V600 mutation-positive locally advanced unresectable or metastatic melanomaAdditional Ph III data; submit global reg appsMid-2017; 2017
AstraZeneca plc (LSE:AZN; NYSE:AZN)DurvalumabFirst-line NSCLCPh III MYSTIC data1H17
Axovant Sciences Ltd. (NYSE:AXON)Intepirdine Mild to moderate Alzheimer’s diseasePh III data2017
Bavarian Nordic A/S (CSE:BAVA) ProstVacMetastatic castration-resistant prostate cancer (CRPC)Final Ph III data2017
BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX)BCX7353 Hereditary angioedema (HAE)Ph II data1Q17
Cardiome Pharma Corp. (TSX:COM; NASDAQ:CRME) / SteadyMed Ltd. (NASDAQ:STDY)Trevyent treprostinilPulmonary arterial hypertension (PAH)Submit NDA2Q17
Catalyst Pharmaceuticals Inc. (NASDAQ:CPRX) / BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)Firdapse amifampridine phosphateLambert-Eaton myasthenic syndrome (LEMS) Ph III data; resubmit NDA2H17
Celgene Corp. (NASDAQ:CELG)OzanimodRelapsing MS

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