Rich recognition finally arrives for Array

Despite inventing and licensing out experimental small molecules for more than 20 years, Array Biopharma only seriously moved onto investors’ radars in the past 18 months. Pfizer’s $11.4bn bid for the company, announced today, shows that industry has also finally taken notice.

With a marketed cancer combination and a substantial royalty stream portfolio the attraction of Array is understandable. What is more surprising is the price that was needed to get the deal done: at 62% above Array’s closing share price on Friday the premium looks even chunkier when considering that the company’s stock had already doubled in value so far this year.

Pfizer can readily afford this, of course, though on an investor call this morning the pharma giant was bombarded with questions about how it had come to its valuation. These enquiries were largely rebuffed, and the company’s vagueness shows how Array’s many moving parts are still very hard to value.

Deal drivers

Pfizer executives described three main value drivers for the deal: the Braftovi/Mektovi combination, which won approval in melanoma last year, the royalty stream portfolio detailed below, and a research platform that Pfizer said would be maintained as an independent entity.

It has to be assumed that Braftovi/Mektovi was the primary source of value here. While Pfizer made clear that melanoma would continue to be a focus, as third to market in this tumour type behind Novartis and Roche the combo has long been seen as the trailing franchise.

Hence Array’s decision to focus on Braf-driven colorectal cancer, an inspired strategy that could well be responsible for piquing the interest of a suitor (Colorectal cancer could see Array stand alone at last, May 22, 2019).

It is here that Braftovi/Mektovi recently scored a win in the Beacon trial, and the potential in this setting has largely driven Array’s recent share price. While Pfizer’s forecast of blockbuster sales in this setting can partly be read as justification of the purchase price, analysts are also pretty optimistic. EvaluatePharma’s sellside consensus sits at $702m in 2024 in colorectal cancer.

Still, much depends on evidence of efficacy in earlier settings, and all eyes are on the first-line, phase II Anchor trial, which reads out early next year. Andy Schmeltz, general manager of Pfizer Oncology, said on the call that that Beacon raised hopes for a similarly strong readout; presumably the company also hopes that the data are strong enough to support accelerated approval.

Pfizer must also be hoping for a win in trials testing Mektovi in combination with checkpoint inhibitors; success here could really potentially make a big difference to future market potential. Three studies are ongoing; first to report, any time now, is a combo with Bristol-Myers Squibb’s Opdivo, in patients with colorectal cancer with microsatellite stable (MSS) disease and a Ras mutation.

BRAFTOVI/MEKTOVI TRIALS TO WATCH
Trial	Project	Details	Data due
Anchor (NCT03693170)	Braftovi + Mektovi + Erbitux	1L Braf mutant mCRC	Early 2020
NCT03271047	Mektovi + Opdivo or Opdivo + Yervoy	mCRC with MSS disease and Ras mutation	Jun 2019
MK-3475-651 (NCT03374254)	Keytruda + Mektovi +/- chemo	mCRC	Nov 2021
NCT03637491	Bavencio + Mektovi +/- Talzenna	Ras-mutant solid tumors	Jul 2022
Notes: mCRC=metastatic colorectal cancer; MSS=microsatellite stable. Source: clinicaltrials.gov & company presentations.

At the end of the day much has yet to fall into place for Braftovi/Mektovi. And the same can be said for Array’s royalty stream business, which includes several very promising agents, though most have yet to get into pivotal testing.

While Array was certainly successful at inventing and licensing out novel agents, many of its deals were struck at an early stage, the root of much criticism for the business model (In sticking to the knitting has Array given up too much?, January 31, 2019). Royalties due are thus low, and though they represent pure profit these projects would surely have to become hugely successful to move the needle at Pfizer.

The pharma giant predicted that the Array royalty stream would come into its own in the mid-2020s; again, executives declined to name the big contributors, but presumably the Loxo assets must be figure highly.

BRINGING HOME THE BACON? SELECTED ARRAY ASSETS, LICENSED OUT AND WHOLLY OWNED
Project	Status	Licensed to	Royalty
Mektovi (binimetinib)	Approved in melanoma, phase III in CRC	Pierre Fabre & Ono	Pierre Fabre: double-digit royalties, 20-35%
Braftovi (encorafenib)			Ono: double-digit royalties, 22-25%
Vitrakvi	Approved	Bayer (Loxo)	Mid to high single-digit
Ganovo (danoprevir)	Approved (China)	Roche (Intermune)	?
LOXO-292 (selpercatinib)	Phase II (registrational)	Lilly (Loxo)	Mid to high single-digit
Selumetinib	Phase II (registrational)	Astrazeneca	?
Tucatinib (ONT-380)	Phase II (registrational)	Seattle Genetics (Cascadian)	Up to double-digit
Ipatasertib	Phase III	Roche (Genentech)	?
ARRY-797	Phase III	N/A (wholly owned)	N/A
Varlitinib	Phase II/III	Aslan	Low double-digit
ARRY-382	Phase II	N/A (wholly owned)	N/A
Motolimod	Phase II	Celgene (Ventirx)	?
LOXO-195	Phase I/II	Bayer (Loxo)	Mid to high single-digit
MRTX849	Phase I/II	Mirati	High single digits to mid teens
AK-1830/ARRY-954	Phase I	Asahi Kasei Pharma	Up to double-digit
Source: SEC filings.

Finally, Array’s research engine was also spoken of highly by Pfizer executives, with a promise of one new compound to enter the clinic each year. One could even emerge this year – although what the target might be was kept under wraps.

Of course, another way to look at this deal is that Pfizer has paid $11.4bn for another oncology growth driver – and cash-rich big pharma is always happy to pay up for a new talking point. What is certain is that one group of shareholders will be delighted today. After years of seeing the family silver sold off cheaply, Array investors have finally got a real payday.

https://www.evaluate.com/vantage/articles/news/deals/rich-recognition-finally-arrives-array

J&J trial: State’s expert witnesses testify

Testimony continued Monday in the trial of Johnson & Johnson and its subsidiaries, which are accused of helping cause the state’s opioid epidemic through false and misleading marketing efforts that allegedly understated the risks of opioids while overstating their benefits.

From 2000-2017, there were over 6,100 prescription opioid related deaths in Oklahoma, state officials have said. The attorney general has accused Johnson & Johnson of being a public nuisance.

Jason Beaman, chair of Department of Psychiatry and Behavioral Sciences at Oklahoma State University Center for Health Sciences, testified Monday and blamed Johnson & Johnson for helping cause the opioid epidemic through aggressive marketing efforts that downplayed the addiction and overdose risks associated with opioids.

“Had we known that the misinformation campaign was coming, then we could have planned for it,” Beaman said. “It’s going to take us 20 to 30 years to get out of this.”

Earlier in the day, there was testimony about payments to doctors and the influence those payments can have on doctors’ opinions.

“I do not believe a physician should be helping pharmaceutical companies market their products,” testified New York psychiatrist Andrew Kolodny, an expert on the nation’s opioid epidemic and one of the state’s key witnesses in the lawsuit.

Kolodny noted that some doctors kept advocating for the aggressive use of opioids to treat back aches and other non-cancer chronic pain even after it had become clear that overdose deaths had become a huge public health problem. Kolodny said he believes many of those physicians might have backed away from that position if they weren’t being paid by pharmaceutical companies.

Kolodny’s testimony came as he was asked to comment on documents showing that Johnson & Johnson directly paid certain doctors anywhere from $4,898 to more than $265,000 over a series of years to talk about the use of opioids in the treatment of chronic pain.

Johnson & Johnson attorney Michael Yoder attempted to turn the tables on Kolodny, asking him about the money he had received as an expert witness for the state and whether that had influenced his opinions expressed during the trial.

Kolodny testified previously that he was being paid $725 an hour to assist Oklahoma attorneys in preparing their case and to appear as an expert witness. He estimated he had received $300,000 to $500,000 from the state at the time of his pretrial deposition and said that he had worked a lot of hours since then preparing and testifying during the trial.

Kolodny said even before the state started paying him, he was publicly expressing his belief that aggressive marketing by opioid manufacturers caused the opioid crisis.

John Sparks, Oklahoma counsel for Johnson & Johnson and Janssen Pharmaceuticals Inc., disputed Kolodny’s testimony.

“There is a gap wide enough to drive a truck through between Dr. Kolodny’s far-reaching personal opinions and the facts: Janssen’s marketing practices complied with FDA regulations,” Sparks said.

https://www.marketscreener.com/JOHNSON-JOHNSON-4832/news/Johnson-Johnson-Ex-judge-to-oversee-opioid-settlement-discussion-28775553/

Ex-judge to oversee Teva opioid settlement discussion

Steven W. Taylor, a retired Chief Justice of the Oklahoma Supreme Court, has been named a special master to try and work out a dispute between state lawmakers and the state attorney general over a pending $85 millionsettlement agreement between the state of Oklahoma and opioid maker Teva Pharmaceuticals USA Inc.

Last week, Gov. Kevin Stitt and leaders of the Oklahoma House and Senate filed an amicus brief in Cleveland County District Court demanding that the proceeds be paid into the Oklahoma state treasury in accordance with a new state law. In their legal brief, Stitt, House Speaker Charles McCall and Senate President Pro Tem Greg Treat argue that the Oklahoma Legislature gets to decide how the money will be spent.

That approach conflicts with the position taken last week in court by Michael Burrage, one of the outside attorneys assisting Attorney General Mike Hunter in ongoing litigation against opioid manufacturers.

Burrage argued that the money should go into an escrow account controlled by the court and that the judge should oversee how that money, along with any money that might be awarded in an ongoing trial with Johnson & Johnson, would be used to abate problems caused by the opioid epidemic.

District Judge Thad Balkman on Monday granted Hunter and Teva attorneys 15 days to file formal responses to requests to intervene in the case that were filed by the governor, Legislature and a group of cities and towns.

In the meantime, Balkman said he wanted them all to work with former Chief Justice Taylor to see if they could come to an agreement about how the money should be handled.

Hunter told the judge he was working to find a way to harmonize his responsibilities to the governor, Legislature and the judiciary and come up with a solution.

“My hope would be that we can secure the funds in an expeditious manner,” he said.

Teva was the second major opioid manufacturer to announce a settle agreement in the case. Another group of opioid manufacturers headed by Purdue Pharma earlier agreed to pay $270 million to settle its part of the lawsuit.

https://www.marketscreener.com/JOHNSON-JOHNSON-4832/news/Johnson-Johnson-Ex-judge-to-oversee-opioid-settlement-discussion-28775553/

Theravance Reports Phase 2 TD-9855 Data at Parkinson’s Meeting

Theravance Biopharma, Inc. (NASDAQ: TBPH) (“Theravance Biopharma” or the “Company”) today reported new data from the Company’s Phase 2 clinical trial of ampreloxetine (TD-9855) in patients with neurogenic orthostatic hypotension (nOH) in a poster presentation at the 2019 International Association of Parkinsonism and Related Disorders (IAPRD) World Congress. New data demonstrated that the study’s previously reported improvements in nOH symptom severity following four weeks of treatment were sustained until the completion of 20 weeks of ampreloxetine therapy. Following discontinuation of treatment at the end of 20 weeks, these improvements in patients’ nOH symptoms deteriorated, with severity returning to baseline levels. The 2019 IAPRD World Congress is being held June 16-19, 2019 in Montreal, Canada.

Ampreloxetine is an investigational, once-daily norepinephrine reuptake inhibitor (NRI) in development for the treatment of patients with symptomatic nOH. Theravance Biopharma is conducting an ongoing Phase 3 registrational program which includes a randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of ampreloxetine in symptomatic nOH patients with a four-week endpoint. The registrational program’s second study, which is designed to evaluate the durability of response to ampreloxetine, includes a four-month open label phase followed by a six-week randomized, placebo-controlled withdrawal phase.

The IAPRD presentation reported data from the Company’s completed Phase 2 clinical study, which evaluated the efficacy, durability and safety of once-daily oral ampreloxetine in patients with nOH. Following the completion of the single ascending dose portion of the study, patients entered the open-label extension phase, which was designed to evaluate improvement in patients’ symptoms and impact on blood pressure.

https://www.marketscreener.com/THERAVANCE-BIOPHARMA-INC-16501278/news/Theravance-Biopharma-Reports-New-Data-from-Phase-2-Study-of-Ampreloxetine-TD-9855-in-Presentatio-28774243/

China’s Fosun rallies support for a joint bid for Bayer’s animal health unit

As Bayer management predicted, it seems as though the German conglomerate’s for-sale animal health business has indeed attracted high interest.

China’s Fosun International, parent of Fosun Pharma, is considering teaming up with private equity firms or other investors for a joint offer for Bayer’s animal health business, Bloomberg reported, citing people familiar with the matter.

No formal bid has been made, deliberations are at an early stage and Fosun might still decide against it, the people said, according to the news service.

The potentially €8 billion sale has reportedly attracted private equity firms KKR, CVC Capital Partners, Cinven, Advent International, BC Partners and Permira, among others, either as solo bidders or in joint pursuits.

If successful, the takeover would mark another major deal for Fosun since it shelled out $1.1 billion for a 74% stake in India’s injectables-focused Gland Pharma in 2017. Outside of life sciences, the Chinese conglomerate in 2018 snapped up a majority stake in French legacy fashion house Lanvin, but that was a smaller acquisition financially.

Gland has been doing well under Fosun. Thanks to growth of major products such as vancomycin, enoxaparin injection and caspofungin, the Fosun subsidiary generated a year-over-year revenue increase of 26.6% in 2018, and net profit also jumped nearly 40%, Fosun Pharma said in its 2018 annual securities filing.

Rumors emerged last July that Fosun Pharma was in preliminary talks with potential advisers about an Indian IPO for Gland, which could raise about $500 million, Bloomberg reported at the time.

Fosun was originally eyeing an 86% stake of Gland, but later reduced the amount to circumvent the Indian government’s scrutiny. But thanks to a revised pact signed with Gland’s founding family in March, Fosun could gain some additional 3.4 million shares of Gland for no more than $470 million, according to its first-quarter financial disclosure.

Bayer first announced its intention to hive off animal health amid a huge restructuring unveiled last November. After its gigantic $63 billion Monsanto deal, the company has been under pressure to raise cash to beef up its core life sciences portfolio, especially in pharma, where analysts have called its pipeline unexciting.

As part of the overhaul, Bayer has already inked a pact with Nivea parent Beiersdorf to sell its Coppertone sunscreens for $550 million. And a buyer of its Dr. Scholl’s foot care line could be announced later this year, management has said.

In April, alongside its first-quarter earnings, Bayer said it’s determined the best exit plan for animal health is through a sale—rather than a spinoff as in the case of Eli Lilly’s Elanco.

“The interest is very, very high and also very broad,” CEO Werner Baumann said of the animal health unit on the call.

https://www.fiercepharma.com/pharma-asia/china-s-fosun-rallies-support-for-a-joint-bid-for-bayer-s-animal-health-unit-report

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Bayer asks trial judge to reverse $2 billion Roundup jury verdict

Bayer AG has asked a California judge to overrule a $2 billion verdict by jurors who found the company’s glyphosate-based Roundup weed killer responsible for a couple’s cancer, arguing the jury decision was not supported by evidence.

The German drugmaker and chemicals company in court filings on Monday in Alameda County Superior Court in Oakland blamed the massive verdict on “inflammatory, fabricated and irrelevant evidence” from the couples’ lawyers.

“The resulting trial focused not on ascertaining the truth regarding the state of the science, causation, and compliance with legal duties, but instead on vilifying Monsanto in the abstract,” the company, which bought Monsanto last year for $63 billion, said in motions filed with the court.

Bayer faces Roundup cancer lawsuits by more than 13,400 plaintiffs across the United States. It denies the allegations, saying the weed killer and its active ingredient glyphosate is safe for human use.

The verdict and two prior jury decisions against Bayer have triggered steep declines in Bayer shares, leaving it with a market valuation of $56 billion.

Bayer asked Superior Court Judge Winifred Smith, who presided over the roughly seven-week long trial, to reverse the jury decision and enter judgment in Bayer’s favor, or order a new trial.

The Oakland jury on May 13 awarded more than $2 billion to Alva and Alberta Pilliod, finding their non-Hodgkin’s lymphoma to have been caused by using Roundup to kill weeds on their property between 1975 and 2011.

The jury awarded $18 million in compensatory and $1 billion in punitive damages to Alva Pilliod, and $37 million in compensatory and $1 billion in punitive damages to his wife.

Bayer in its court filings called the punitive damages excessive and unconstitutional, and asked Smith to toss or significantly reduce the award. The large punitive damages award is likely to be reduced due to U.S. Supreme Court rulings that limit the ratio of punitive to compensatory damages to 9:1.

Michael Miller, a lawyer for the Pilliods, in a statement on Tuesday said the verdict would be sustained.

“Monsanto is arguing the same worn out arguments it unsuccessfully used in the first trial,” Miller said.

In that trial, a California jury in 2018 awarded $289 million to a California groundskeeper, finding Monsanto’s glyphosate-based weed killers caused his cancer. That award was later reduced to $78 million and being appealed.

In March, a federal jury in San Francisco awarded $80 million to another California man after finding Roundup caused his cancer. The company said it would appeal that decision.

https://www.reuters.com/article/us-bayer-glyphosate-lawsuit/bayer-asks-trial-judge-to-reverse-2-billion-roundup-jury-verdict-idUSKCN1TJ1Z8

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