Pipeline-in-a-drug, page-15

I didn’t provide examples of pipeline-in-a-drug acquisitions in my post - I assume you are referring to the three acquisition examples provided in the first reference?

You are right that only one of the acquired companies had a post-Phase 3 asset. That was Myokardia and it was acquired by BMS for US$13.1bn.

Although these three acquisitions definitely involved pipeline-in-a-drug assets, I’d be hesitant to try to estimate a fair acquisition price for Neuren or NNZ-2591 based on these examples.

Firstly, all three of the acquisitions happened in 2020 during Covid, at a time when biotech valuations were sailing high. It’s a completely different environment for biotechs now, described by one analyst as a “nuclear winter”. Cashed-up pharmas now have a veritable smorgasbord of cheap, cash-starved biotechs to choose from.

Secondly, all three deals were in therapeutic areas in high demand with almost all big pharma – cancer, cardiovascular disease and autoimmune disease.

Thirdly, and related to the previous point, the target drugs were addressing much larger patient populations. Myokardia’s post-Phase 3 cardiovascular asset addressed a US market of 1m people in its first indication. Forty Seven, the company acquired by Gilead for US$4.9bn, was developing its lead drug in two cancer indications which addressed a combined potential US population of 250,000. Momenta, the company acquired by J&J for US$6.5bn, was in Phase 2 and Phase 2/3 trials in two indications with a US patient population of 36,000-60,000 and 400,000-3.1m respectively.

Finally, all of these acquisition targets, beside having pipeline-in-a-drug lead assets also had other drugs in clinical and/or preclinical development.

Possibly better comparators are GW Pharma’s acquisition by Jazz Pharma and Reata’s acquisition by Biogen.

Jazz acquired GW Pharma for US$7.2bn (at a 50% premium), mainly for its lead cannabinoid drug, Epidiolex, which had already been approved or was under review in both the US and EU for the treatment of epilepsy in three rare diseases - Lennox-Gastaut syndrome, Dravet syndrome and Tuberous Sclerosis Complex. GW Pharma was already deriving US$500m+ p.a. from sales in these indications. In addition, it had another drug in Phase 3 trials for the treatment of spasticity associated with multiple sclerosis and spinal cord injury, and earlier-stage cannabinoid candidates for autism and schizophrenia. Jazz intended to work through a pipeline of 19 clinical development programs across neuroscience and oncology, including in sleep, epilepsy, movement disorders, psychiatry, haematology and solid tumours.

The similarity to Neuren here is the CNS, rare disease focus combined with the potential to expand into many more conditions, including non-orphan. However, GW Pharma was obviously much more clinically advanced than Neuren is at this time and also drawing significantly more income. Also worth noting is that GW Pharma was sold at the very peak of the biotech boom (early 2021).

Reata is probably a better comparator and one I’ve written about here before. Reata was acquired by Biogen for US$7.3bn, which represented a 59% share price premium. Reata’s lead drug, omaveloxolone had already been approved by the FDA for the treatment of the neurodegenerative disease, Friedreich’s ataxia, which has a similar patient population to Rett syndrome. Pre-clinical studies had also indicated that omaveloxolone might have application in the treatment of osteoarthritis.

While Reata was sold in 2023, during the current biotech slump, it had the advantage of still owning global rights to omaveloxolone. In addition, a marketing approval application had already been submitted in the EU (and was approved shortly after). Finally, it had other drugs in development – one in Phase 1 and two in pre-clinical.

Other less favourable rare disease biotech acquisitions, this year and last, which you might like to look at are:

• Novartis acquisition of Chinook, which had two Phase 3 assets for the same rare liver disease. The estimated US patient population is 60,000-150,000. Novartis paid a 69% premium - US$3.2bn in cash with a further US$0.3 bn contingent on a milestone being met.
• Astra Zeneca acquired Amolyt Pharma for its Phase 3 asset for a rare disease with an addressable US population of 115,000. AZ paid US$800m upfront with a furtherUS$250m contingent on milestone success.
• Sanofi acquired Inhibrx to gain access to a Phase 2 orphan drug for a rare lung disease that impacts 1 in 2,000-6,000 individuals. Sanofi paid US$1.7bn upfront (US$30 per share) with a further US$0.5bn contingent on milestone success. The US$30 per share represented by the US$1.7bn payment was ~ 10% below Inhibrx's last trading price.

As companies and assets can differ in so many ways, it's very difficult to determine a likely acquisition price for Neuren from these “comparative” deals. On the one hand, NNZ-2591 is not as deeply advanced as some of the acquired assets mentioned here (it is now post-Phase 2 in two indications). On the other hand, NNZ-2591 has a great safety/tolerabilty profile and its mid-stage success is supported by preclinical success across an amazing breadth of other indications – Angelman syndrome, Prader-Willi syndrome, Fragile X syndrome, Parkinson’s disease, TBI, MS, stroke, cognitive impairment and peripheral neuropathy. Finally, NNZ-2591 is highly differentiated in that it addresses not just one, but multiple neurodevelopmental disorders. Despite massive unmet need, only one drug has been approved to date in neurodevelopmental disease, and that drug is trofinetide.