M&A, Big Pharma, Vaxinia and train rides
Attributing the potential value of Vaxinia to Imugene’s share price is difficult. To do so it may be worth taking a look at what Big Pharma are paying for assets in 2023.
M&A in the oncology field is strong, with Mercks decision to but Prometheus Biosciences an example of Big Pharma opening its cheque book to take a bet on companies without any profit to date, or even any revenue for that matter. Prometheus will give Merck more of a presence in immunology with PRA023, an anti-TL1A monoclonal antibody for ulcerative colitis and Crohn’s disease. The therapy is several years away from commercialization, Moody’s noted, with phase 3 trials in those indications beginning this year. Should PRA023 be successful, Merck could gain some protection from an over-reliance on Keytruda, which will begin to see market exclusivity erode in 2028.
The Economist
The Economist notes a price tag of $10.8bn would look hefty for most acquisitions of smallish and newish companies. But for Merck, a drugs giant known as msd outside America, the money it is spending to buy Prometheus Biosciences, a biotech firm based in California, is relatively small change. In the world of big pharma such deals have the potential to generate enormous returns.
In their article of April 20 this year the Economist follows on by writing that even though Prometheus makes no profits to speak of and has no approved drugs on its slate, the big prize for Merck is pra023, a drug approaching the late-stage of clinical trials developed by Prometheus to treat ulcerative colitis, Crohn’s disease and other nasty autoimmune conditions. For now, Prometheus is burning through cash at a fast-rising rate. Merck’s decision to scoop it up is a bet on what comes next.
Big Pharma, Crohn’s, ADC’s, cancer and and Imugene
So what does all this mean for Imugene? Surely their products are worth a bet on, given the fact a patent cliff is fast approaching for many Big Pharma’s, including Merck. Having acquired Prometheus Merck has taken a punt already in 2023, but remember they did miss out on Seagen, which was going to cost them 4 times as much as Prometheus. They still have some fuel left in the tank no doubt.In spite of recent activity Goldman Sachs noted in July that Big Pharma has 700 billion in their kitty for mergers and acquisitions.
Recent M&A Activity
Acquired
| 1 | | Seagen | Pfizer | 000m | Mar, 2023 | Acquisition |
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| 2 | Horizon Therapeutics | Amgen | $28300m | Dec, 2022 | Acquisition |
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| 3 | Biohaven Pharmaceutical Holding | Pfizer | $12210m | May, 2022 | Acquisition |
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| 4 | Prometheus Biosciences | Merck | $10800m | Apr, 2023 | Acquisition |
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| 5 | Oak Street Health | CVS Health | $10600m | Feb, 2023 | Acquisition |
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Its interesting is it not, yesterday I wrote of Amgens decision to buy the oncolytic virus T - Vec pre revenue, and today of Merck buying pra023 pre revenue. Why not take a look at Vaxinia pre revenue? If $10.8 billion USD was placed on the table for Vaxinia that would equate to approximately $2.40 per IMU share. It doesn't sound like a lot for a drug that can potentially cure cancer patients with solid tumours. Particularly when one considers Pfizer paid $43 billion USD for Seagen, a company with Anti Drug Conjugates (ADC’s). Whilst an ideal ADC has the following features: A monoclonal antibody (mAb) that targets a specific cancer antigen while not harming healthy cells, they are ostensibly a delivery method, the messenger as it were, as opposed to the message. Although Professor Fong is yet to determine the most appropriate mode of delivery for Vaxinia, he has stated that once delivered to the solid tumour, his drug works. By working he means that once infected with the virus, the patients solid tumour effectively blows up and is killed.
PRA023 is being developed for the treatment of immune-mediated diseases, including ulcerative colitis (UC), Crohn’s disease (CD) and other autoimmune conditions. There are 70,000 new cases of inflammatory bowel disease (IBD) each year. Yet there are over 1,900,000 cases of cancer. So clearly Vaxinia is swimming in a much bigger pool than PRA023. Does that mean its worth potentially 28 times what Merck paid for Prometheus a few months ago? Could Vaxinia be worth over $68 to the IMU share price? If Mercks actuaries valued their play in the IBD market at over 10 billion, what’s a market with 28 times more prospective participants worth? Well, I guess there are a myriad of permutations and combinations one would have to consider before we could reach that conclusion. Factors such as the cost to purchase PRA023 as opposed to the cost to purchase Vaxinia. The respective market penetration of both products would need to be considered as well. But it is definitely food for thought is it not?
Vaxinia
Unlike PRA023, or Seagen’s ADC’c for that matter, Vaxinia has a little way to go in its development before it can deliver $68 to the IMU share price, or perhaps even the lesser sum of $2.40. The existing cohorts in the current Vaxinia (MAST) Trial need to be assessed in the lab before being peer reviewed. In addition to these cohorts their is another cohort in both arms to be enrolled prior to the primary endpoint in the study, that being forecast as May 2024. Whilst Professor Fong has expressed an interest in dosing further up the therapeutic window to ascertain how much Vaxinia can be administered to solid tumour patients before toxicity sets in. This shall no doubt take time to complete.
Then there is the need as noted above to establish the best mode of delivery for Vaxinia. Is it via IT or IV administration, or perhaps via a third party, such as RenovoRx's TAMP therapy platform. Ensuring Vaxinia reaches those hard to find tumours behind the abdominal cavity wall is a goal for professor Fong, in addition to the treatment of solid tumours in general. Then there is the requirement for Vaxinia to deliver a pattern of results within a specific cancer indication, if the FDA is to grant Fast Track Approval status for the drug, via the “significant breakthrough therapy route”. In other words, as an example,Vaxinia may have to produce 3 complete responses in colon cancer patients, or 3 partial responses and 2 complete responses in those with colectoral cancer. Once again enrolling patients with similar cancer indications, treating them with Vaxinia, and producing the said results is going to take time.
SITC, Merck and Fiercepharma
Taking all things into consideration I would think Big Pharma is following the Vaxinia Trial with great interest. Merck for one already has an interest, when one considers Keytruda is being administered in combination with Vaxinia, both in IT and IV format. If the ongoing results highlighted at the forthcoming SITC Conference in San Diego are promising for Vaxinia, why would they wait to pull the trigger? In all reality they probably won’t. Recent moves by the company including the $10.8 billion purchase of Prometheus Biosciences and its late-stage bowel disease candidate PRA023—have Merck CEO Rob Davis thinking beyond the foreboding date. As noted on fiercepharma.com “I am no longer focused on 2028; I am looking at how do we have sustainable growth well into the next decade,” Davis said Thursday on the company’s first-quarter earnings conference call. fiercepharma.com suggests Davis didn’t waste any time with his $11.5 billion acquisition of Acceleron in 2021. The deal came just two months after he took the reins from former CEO Kenneth Frazier. It brought the New Jersey-based drugmaker portfolio diversity, led by pulmonary arterial hypertension (PAH) candidate sotatercept, which is on track for approval this year and carries peak sales potential of $2 billion.
Train rides
If the truth be known Merck could probably buy all of Imugene for what they paid for Prometheus Biosciences, that being $10.8 billion USD. Once again that’s the equivalent of 57 times the current IMU share price, or $2.40 to be precise. IMU shareholders may well take that, given the current state of play. Merck could then bet on the price escalating to the aforementioned $68 down the track. Unfortunately existing IMU shareholders may miss out on that train ride. Just for the record bullet trains travel at speeds of between 240 km and 320 km per hour. That’s how fast the market may have to travel to keep up with the IMU share if Vaxinia starts to deliver the goods.
DYOR Seek investment advice as and when required Opinions only
Thanks for all the kind comments on yesterdays post. It takes time to collate data and post frequently. Your ongoing sentiments are appreciated
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