Hey team,
As there has been a bit of talk around Mergers and Acquisitions, I figured it was a good time to recap the M&A landscape to determine what realistic acquisition values are for MSB.
First of all - Background partnering activity in cell therapy companies.
- Bluerock Therapeutics: Aug 2019 Bayer acquires BlueRock Therapeutics to build leading position in cell therapy. Implied total company value of up to USD 1 billion, inclusive of 40.8 percent stake currently held by Bayer. Initial focus in neurology, cardiology, and immunology with start of first clinical program in Parkinson’s disease expected later this year
- Fate Therapeutics: April 2020 Worldwide Collaboration with Janssen for Novel iPSC-derived Cell-based Cancer Immunotherapies. Collaboration leverages Company’s iPSC product platform and Janssen’s proprietary tumor-targeting antigen binders to create novel CAR NK and CAR T-Cell product candidates. Fate to receive $50 million upfront paymentand $50 million equity investment, plus full funding for the research and development of collaboration candidates through IND filing. Collaboration candidates to be developed against up to four tumour-associated antigens for hematologic malignancies and solid tumours. Fate is eligible to receive payments of up to $1.8 billion in development and regulatory milestones and up to $1.2 billion in commercial milestone payments, plus double-digit royalties
Reviewing these companies, if we think Bluerock got $1b from preclinical data ONLY, and Fate scored a $3b partnership following a phase 1 study, it's important to acknowledge that MSB has 4 mature pipeline products that have completed phase III - and have a chance to be sufficient to file for approval.
Above is the data for the success rates of small molecule/biologic development by indication. Let us take into consideration the risk adjustment of the valuation (taken from https://cdn2.hubspot.net/hubfs/3828687/Alacrita_April2019/PDF/Pharmaceutical-Probability-of-Success.pdf):
Let's take Fate Therapeutics therapy that entered >$3b partnership with Jansen. Fate are developing immune cells so it's different - but still a good point of reference, you can easily apply this to bluerock therapeutics too. Fate's partnership came after phase I data. Their solid tumor therapy still had a chance of failing at phase II (33.7% chance of success), phase III (46.9% chance of success) and at registration (88% chance of success). Collectively this gives their program a 13.9% chance of success in that indication following phase I, not very big.
Background late stage cell therapy acquisition:
- Kite Pharmaceuticals: Aug 2017 Gilead Sciences to Acquire Kite Pharma for $11.9 Billion. Kite's Lead CAR T Therapy Candidate, Axicabtagene Ciloleucel, Under Priority Review in the U.S. and Expedited Review in the EU. Provides Broad Pipeline in Hematologic Malignances and Solid Tumors and Robust Platform for Continued Innovation.
Here you see that derisking coming into action, as the program has advanced it is a far more valuable asset and scored itself $12b pending regulatory review.
Consider Mesoblast:
MSB currently has 4 candidates that have finished phase III and will be looking towards registration. I won't go into the numbers because I've done that before, but CHF alone has a greater market size than solid tumours. Let us ignore GvHD to add to the potential upside, we will look at only ARDS, CHF, and CLBP. Let us assign that $12b value to each indication (they are not evenly valued, there's +/- here, but this is providing ballpark figures to provide investors comfort instead of actually trying to calculate an M&A value). That would give MSB a potential acquisition value of over $36b, which is >36x current sp, and this is low-balled as it leaves out GvHD and CHF+ARDS have massive market sizes.
Above is a list of the top 20 M&As by pharma. Easily on the cards, and it has a massive upside.
Cheers,
Gang gang
(20min delay)