In a major twist for avid investors in the healthcare sector, it was AbbVie (ABBV) that emerged as the winner in a three-way bidding war for Pharmacyclics (PCYC) this week. AbbVie will pay $21 billion ($261.25 per share) in a mix of cash and stock for the developer of Imbruvica (ibrutinib), a BTK inhibitor approved to treat some blood cancers. Considering that Pharmacyclics has economics on just 50% of the drug, the transaction effectively values Imbruvica at $42 billion.
There’s been quite a bit of himming and hawwing among healthcare investors in the days since as to whether AbbVie overpaid (Johnson & Johnson (JNJ) co-develops and splits revenues with PCYC on the product). JNJ and Pfizer (PFE) are reported to have been the other two bidders for Pharmacyclics.
Sell-side consensus is for Imbruvica sales of $1.3 billion in 2015, and according to Evaluate Pharma, $6.5 billion in 2020. One thing to note: ABBV has seen data for Imbruvica in other settings (namely, solid tumors) and in which the drug is not approved, data that investors have not yet seen. Whether that’s enough to justify the price remains to be seen, but this won’t be the first time that biopharma has been accused of overpaying. Investors raised hell four years ago when Gilead (GILD) paid $11 billion for Pharmasset (VRUS), and the same in 2001 when Amgen (AMGN) bought Immunex. The asset in question, sofosbuvir, generated $10.3 billion in its first year on the market, and Immunex’s Enbrel has justified itself more than once over.
Orexigen Therapeutics (OREX) caused a stir when they released this week initial results from an ongoing study of Contrave, their approved weight loss drug, that measured the compound’s impact on cardiovascular outcomes including stroke and heart attack. Contrave appears to not only help patients lose weight but may also reduce their risk of a major cardiovascular event.
Contrave is approved as an adjunct to a reduced-calorie diet for weight management in adults with an initial body mass index of 30 kg/m2 or greater (obese) or 27 kg/m2 or greater (overweight). The FDA required that Orexigen run a large, controlled trial – the 8,910-patient LIGHT study – measuring Contrave’s effect on Major Adverse Cardiovascular Events (MACE) compared to placebo.
A newly issued patent, which the company highlighted in an 8K filing, incorporates data from an interim analysis of the LIGHT Study, which was conducted when 25% (94) of the expected MACE had occurred and was included in Orexigen’s New Drug Application to the FDA. According to the SEC filing, Contrave significantly reduced the risk of MACE (including Myocardial Infarction, Stroke, or CV Death) compared to placebo. Contrave is the first weight loss drug among its peers (Arena’s (ARNA) Belviq and Vivus‘ (VVUS) Qsymia) to report CVOT results.
A day later, however, FDA officials made it clear that the CVOT data should not have been released. In an interview with Forbes writer Matthew Herper, FDA’s director of the Office of New Drugs John Jenkins said that the interim data could be potentially “misleading.” He also highlighted concerns about the future of the LIGHT study. In a public statement, the FDA followed suit, saying they “strongly urged Orexigen to protect the interim data from public discourse, and we are very disappointed by Orexigen’s actions.”
Orexigen defended itself, saying that it was necessary to make sure the information from the study was equally available to all investors. This has not gone down well with the agency, which requires that preliminary data be kept confidential, as disclosure could undermine the ongoing study. OREX opened the week at just under $6, traded as high as $9 with the news, and ended the week back at $7.00. You can read more on this rollercoaster saga, which isn’t over yet, here.
Finally, in an 8K filing on Thursday after the bell, Conatus Pharmaceuticals (CNAT) (a name we’ve followed since last year) reported that Dr. Gary Burgess has tendered his resignation as Senior VP, Clinical Research and CMO.
Conatus plans to release results from a phase II study of its lead drug candidate, emricasan, in NAFLD/NASH by the end of the month, according to company guidance. Conatus’ CMO resigning with no explanation is a clear red flag in front of these results. Burgess has worked with emircasan for nearly a decade, participating in its development at Pfizer (PFE) after emricasan was picked up in the 2005 acquisition of Idun. In an article on Thursday evening, Mr. King elaborated on why Burgess’ departure is particularly alarming. All investors can do for now is speculate – the NAFLD/NASH results are due within the month.
One or more of PropThink’s contributors are long ABBV, JNJ, PFE, AMGN, GILD, OREX, or CNAT.
