#BIO18: Oncology surplus could drive down values

• 2018 is shaping up to be the second strongest dealmaking year in the last decade based on M&A activity during the first quarter, reports Syneos Health in its Dealmakers’ Intentions Survey. Total deal values could reach between $200 billion to $250 billion this year, second to 2015’s mark of $425 billion.
• The share of large-cap pharmas participating in M&A deals is actually decreasing, from a high of 82% in 2009 to just about 57% in 2017. Deals are being driven by alternative sources now, like mid-sized and regional buyers, as well as an increase in financial alternatives.
• The report presented at the BIO International Convention surveyed 66 members of the biopharma community who participate on either or both sides of deals and who are involved in decision making to gauge expectations for deal activity over the next year.

Unless you’ve been living in a cave, you know that oncology is the hottest therapeutic area in the industry. But what you might not realize is that market forces suggest the market is overheating, says report author and Syneos Health Managing Director of Commercial Strategy & Planning Neel Patel.

“Supply of oncology assets has eclipsed demand; an early sign of an area, as an industry, that we may have over-invested in,” he said in an interview.

He noted the increase in supply is in part due to the number of “fast follow-ons” currently in development, like the checkpoint inhibitors that seem to be in every drug developer’s pipeline. The high valuations in the space and the rise of immuno-oncology has led many drug developers that weren’t traditionally oncology players pivoting to the space.

“This suggests that premiums in the oncology space could start seeing a potential decline in the coming year for products that are not highly differentiated,” said the report, which notes the spread between supply and demand has increased from 2% in 2017 to 15% in 2018.

Other areas seeing a supply surplus are central nervous system drugs and infectious disease drugs.

Meanwhile, there is a demand surplus for hematology, respiratory/pulmonology and renal drugs.

But the report points out that no clear preference for a development stage emerged this year, indicating buyers and sellers are concentrating most on how assets fit into their current portfolios.

https://bit.ly/2M3VduI

Arkay Trial to Evaluate Superiority of RK-01 Over Metformin in Type 2 Diabetes

ARKAY Therapeutics, LLC, a privately held biopharmaceutical company focused on developing innovative, orally-active combination products for the treatment of type 2 diabetes and related disorders, announced today that the U.S. FDA has approved its IND application and the clinical study “may proceed.” ARKAY Therapeutics plans to evaluate the safety, tolerability, and superiority of RK-01 over metformin in newly diagnosed drug-naïve as well as obese type 2 diabetes patients with inadequate glycemic control with metformin monotherapy. RK-01 is a proprietary formulation of valsartan plus celecoxib dual add-on to metformin-HCl XR. Metformin is the current first-line of therapy.   “The approval of the IND application is an important milestone for the company. We expect RK-01 to prevent metformin failure by maintaining a state of insulin sufficiency and reduce the risk of insulin dependence in type 2 diabetes patients” said Ravi Kumar, Ph.D., founder and CEO of ARKAY Therapeutics. “On behalf of the company, I would like to thank our scientific advisors for contributing to ARKAY’s responses to the FDA’s requests for additional information during the 30-day safety period. We are excited that this novel approach — which represents a new paradigm of treating type 2 diabetes in the context of comorbidities and coexisting conditions — has the potential to prevent or delay initiation of insulin therapy,” Dr. Kumar added.    ARKAY’s patent, 9,839,644, that protects the formulations and the method used for RK-01 was issued by the U.S. Patent and Trademark Office in December 2017. A continuation patent application, publication number US-2018-0042945-A1, that protects additional formulations and methods has also been filed.

https://bit.ly/2svA84f

Germany-Based Companies Open Lab Space in U.S.

There are several recent announcements of German companies opening laboratories in the U.S. It is probably not related to the recent news that the U.S. Justice Department gave Germany-based Bayer and U.S.-based Monsanto the go-ahead for their merger. Due to anti-trust issues, Monsanto has to sell about $9 billion in assets, and European regulators also required the sale of $2.54 billion in assets, which are being sold to BASF. The deal is expected to close by the end of June. After the various divestment, the combined agricultural supplies company will have sales of about 20 billion euros.

Reuters noted, “Bayer’s move to combine its crop chemicals business, the world’s second-largest after Syngenta AG, with Monsanto’s industry-leading seeds business, is the latest in a series of major agrochemicals tie-ups. U.S. chemicals giants Dow Chemical and DuPont merged in September 2017 and are now in the process of splitting into three units. In other consolidation in the sector, China’s state-owned ChemChina purchased Syngenta and two huge Canadian fertilizer produces merged to form a new company, now called Nutrien. Bayer committed to selling its entire cotton, canola, soybean and vegetable seeds businesses and digital farming business, as well as its Liberty herbicide, which competes with Monsanto’s Roundup.”

InflaRx NV, based in Jena, Germany, announced it has opened a new research laboratory in Ann Arbor, Michigan. It is part of InflaRx Pharmaceuticals, a wholly owned U.S. subsidiary of the InflaRx NV group. The company focuses on inflammatory diseases, specifically by targeting the complement system, a key aspect of the innate immune system.

The company launched an initial public offering on the Nasdaq in November 2017, and recently had a follow-on offering. The company expects to release data from its Phase IIb clinical trial for IFX-1 in the first half of 2019.

IFX-1 is a first-in-class monoclonal anti-complement factor C5a antibody being developed to treat hidradenitis suppurativa. This is a dermatological disease that typically beings as pimple-like bumps on the skin, but often occur on the underarms and groin.

“At InflaRx, our primary focus is to discover and develop complement-based therapeutics that can change the way inflammatory diseases are treated by providing innovative solutions for patients with currently unmet medical needs,” said Niels Riedemann, InflaRx’s chief executive officer, in a statement. “The opening of InflaRx’s new research site in Ann Arbor, the city where our co-founder and CSO, Renfeng Guo, and I met and conducted our post-graduate studies researching the complement system, highlights the company’s strong connection to cutting-edge science and dedication to innovation.”

Similarly, Centogene, headquartered in Rostock, Germany, announced it was opening its first U.S.-based rare disease laboratory in Cambridge, Massachusetts. The new facility will open on August 1 and will be the primary point of contact for the company’s collaboration partners.

The new space will include a state-of-the-art high-throughput genetic testing laboratory as well as biochemical, proteomic, metabolomics and genetic analysis capabilities.

“Centogene is one hundred percent focused on translating rare disease genetics into medical breakthroughs and we are thrilled to continue our global expansion into the preeminent biotech hub of Cambridge,” said Arndt Rolfs, chief executive officer and founder of Centogene, in a statement. “As a company that is at the nexus of elucidating rare hereditary diseases by combining proteomic, metabolomics and genomic solutions, we look forward to working even more closely with our pharmaceutical, academic and medical partners in the U.S.”

Centogene is one of the largest genetic testing companies in the world, offering the leading proprietary human genetic interpretation database, CentoMD.

https://bit.ly/2sJs4w9

Hain Celestial started at buy by Deutsche Bank

Deutsche Bank initiates coverage on Hain Celestial (NASDAQ: HAIN) with a Buy rating and a price target of $33.00.

Analyst Rob Dickerson commented, “We’re initiating coverage of Hain Celestial Group (HAIN), a global producer of natural and organic food and personal care products, with a Buy rating and $33 price target, or 22% upside potential over the next 12 months. Although the natural/organic food and personal care space has watched revenue growth decelerate in the U.S. since 2015 and competition continues to ramp for products with healthier attributes, we see such deceleration stabilizing, while still remaining materially ahead of traditional packaged food growth and a net positive for Hain. Our category, brand, SKU, and manufacturing facility optimization analysis points to margin upside potential at least in line with the company’s FY’20 $350mm gross savings target and a more concrete path to a stronger margin profile. Further reductions to complexity should increase management’s strategic optionality, with the decision to divest the protein business being an important first step. Our base case assumes $250mm in share repurchases with special dividend cash allocation potential, driven by the expected divestment of H.P.P., increased brand reinvestment, and modest margin improvement through FY’20. Additionally, given the company’s strategic optionality, we ran three different scenarios for potential further brand and asset divestments – all scenarios analyzed suggest higher potential shareholder returns than our base case. Overall, we find the risk/reward on the shares attractive given the company’s underlevered balance sheet, excess cash generation potential, strategic optionality, and current valuation.”

https://bit.ly/2xOsSWc

Kate Spade death reminder of prevalence of depression

First daughter Ivanka Trump tweeted advice to people facing depression and thinking about taking their own lives, in the wake of American fashion designer Kate Spade’s apparent suicide on Tuesday.

“Kate Spade’s tragic passing is a painful reminder that we never truly know another’s pain or the burden they carry,” Trump tweeted. “If you are struggling with depression and contemplating suicide, please, please seek help.”

Ivanka Trump

@IvankaTrump

Kate Spade’s tragic passing is a painful reminder that we never truly know another’s pain or the burden they carry. If you are struggling with depression and contemplating suicide, please, please seek help. https://twitter.com/800273talk/status/892129387017056256 …

1:22 PM – Jun 5, 2018

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Trump, who owns a fashion line in her namesake, quoted a post from The Lifeline, a national suicide prevention hotline, stating, “You are enough. If you find yourself struggling, remember that the Lifeline is here for you, 24/7, at 1-800-273-TALK (8255).”

Trump’s tweet came about eight months after she revealed in a television interview that she struggled with postnatal depression. The senior White House adviser said she went through a “very challenging emotional time” after the births of her three children.

“I felt like I was not living up to my potential as a parent or as an entrepreneur and executive,” Trump said. “I had such easy pregnancies that in some ways the juxtaposition hit me even harder.”

One in nine women face postnatal depression, according to the Centers for Disease Control and Prevention.

Spade, 55, was found hanged in her New York City apartment by her housekeeper on Tuesday morning. She became famous for her handbag designs, but Spade separated from her company in 2007, a year after Liz Claiborne Inc. acquired it from the Neiman Marcus Group.

U.S. Ambassador to the United Nations Nikki Haley tweeted a message similar to Trump’s.

“The passing of Kate Spade is a stark reminder that we never know the struggles of a person regardless of their outward persona. If you or anyone you love is struggling, there is help. You don’t have to be alone,” Haley tweeted. “The Natl Suicide Prevention Hotline is 1-800-273-8255 #RIPKateSpade.”

https://bit.ly/2Hob7MK

Facebook Confirms Data-Sharing Deals with Chinese Tech Firms

Facebook Inc. said Tuesday that it struck data partnerships with at least four Chinese electronics firms, including Huawei Technologies Co., a telecommunications-equipment maker that U.S. officials view as a potential tool for state-sponsored spying.

The four partnerships are among the roughly 60 that Facebook struck with device manufacturers starting in 2007 so they could recreate the Facebook service on their devices, a Facebook spokeswoman said. As of Tuesday, more than half of those partnerships have been wound down, the spokeswoman added.

The social-media company said it plans to wind down its data-sharing partnership with Huawei by the end of the week. It isn’t clear when Facebook will end partnerships with the three other companies: Lenovo Group Ltd., the world’s largest personal-computer maker; Oppo Electronics Corp., a smartphone maker; and Chinese electronics conglomerate TCL.

Facebook officials defended the decision to work with Huawei and said that no data belonging to Facebook users was saved on Huawei servers. Facebook had a manager and an engineer review the apps before they were deployed to ensure the data wasn’t saved on company servers, the Facebook spokeswoman said.

“Huawei is the third-largest mobile manufacturer globally and its devices are used by people all around the world, including in the United States,” Francisco Varela, vice president of mobile partnerships, said in a statement. “Facebook along with many other U.S. tech companies have worked with them and other Chinese manufacturers to integrate their services onto these phones.”

The New York Times earlier reported on Facebook’s device partnerships with companies like Apple Inc., Amazon.com Inc. and Microsoft Corp. After the Times article, several lawmakers said they felt they had been misled by Chief Executive Mark Zuckerberg, who testified in April that Facebook restricted data access to outsiders in 2015.

“Facebook’s integrations with Huawei, Lenovo, OPPO and TCL were controlled from the get go — and we approved the Facebook experiences these companies built,” Mr. Varela said. “Given the interest from Congress, we wanted to make clear that all the information from these integrations with Huawei was stored on the device, not on Huawei’s servers.”

The company is dealing with the fallout related to Cambridge Analytica, a research firm that had ties to President Donald Trump’s 2016 campaign and improperly obtained the data of 87 million Facebook users. The crisis sparked questions about Facebook’s lax oversight of its platform, an investigation by the Federal Trade Commission and two congressional appearances by Mr. Zuckerberg last month.

Facebook argues that the device partnerships are different from the data extended to third parties like academics and mobile apps. Facebook negotiated each device deal differently.

Still, lawmakers have raised several concerns about Facebook’s partnership with Huawei, the subject of a 2012 report by U.S. congressional investigators who said the company could be exploited to spy or harm the U.S. telecommunications network. Huawei makes telecom equipment and smartphones.

“The news that Facebook provided privileged access to Facebook’s API to Chinese device makers like Huawei and TCL raises legitimate concerns, and I look forward to learning more about how Facebook ensured that information about their users was not sent to Chinese servers,” Sen. Mark Warner said in a statement Tuesday, referring to the website’s application programming interface, or set of software-building tools.

It isn’t clear why Facebook continued to maintain a relationship with Huawei despite the U.S. government’s concerns. When asked, the Facebook spokeswoman said the company hasn’t seen nor does it suspect any misuse of Facebook user data.

https://bit.ly/2sIZuLn

Nurse practitioners increasingly fill gap in primary care delivery

• With an ongoing physician shortage, primary care practices are increasingly turning to nurse practitioners and other interdisciplinary provider scenarios to fill the care delivery void, a new study in Health Affairs finds.
• In 2016, NPs represented a quarter of the provider workforce in rural practices and 23% in nonrural practices — up from 17.6% and 15.9%, respectively, in 2008.
• NPs were most prevalent in states with full scope-of-practice laws. However, the fastest growth was seen in states with reduced and restricted scopes of practice.

The Association of American Medical Colleges estimates a shortfall of as many as 105,000 doctors by 2030. In primary care, that number could reach 43,000. Meanwhile, the U.S. population is expected to grow by about 2.3 million people each year between now and 2030, according to U.S. Census Bureau data.

NPs are a potential way to mitigate the physician shortage while also improving care coordination and population health efforts.

In the face of these trends, the AAMC began pushing for higher medical school enrollment in the early 2000s — a drive that has seen both an increase in the number of medical schools and in matriculants. The group is also focused on interprofessional teamwork to increase the use of NPs and physician assistants.

Edward Salsberg, director of health workforce studies at George Washington University’s Health Workforce Institute, believes such a team approach can help solve the physician shortage problem. “While the number of new physicians is growing slowly, the number of NPs and PAs is growing very rapidly, as is a whole host of other professions,” he told Healthcare Dive via email earlier this year. “Making better use of the workforce we have through innovations in service delivery and modifications in scope of practice laws/regulations can help increase access, improve quality and constrain the growth in health care costs.”

According to the Health Affairs study, the number of NPs is rising annually, with 87% educated to provide primary care. “Policymakers could further encourage these trends by continuing to invest in NP education and training and by facilitating direct reimbursement for NP-delivered care,” the authors write.

They point to the Affordable Care Act’s Graduate Nurse Education Demonstration, which reimbursed five hospitals for the cost of training NPs in primary care. The pilot sunsets next month, with no plans for further funding. Direct reimbursement of NP services could also incentivize practices to use NPs at the top of their practice. “Both strategies can be accomplished in ways that benefit a variety of stakeholders, including patients,” the study says.

https://bit.ly/2LYcYeS