AstraZeneca reportedly eyed merger with Gilead. But does ‘Gileaz’ make sense?

Six years ago, AstraZeneca CEO Pascal Soriot fought off Pfizer’s $118 billion takeover attempt. Now, the defender is reportedly playing offense, going after a deal of similar size.
The British pharma informally approached Gilead Sciences last month to gauge its interest in a merger, Bloomberg reported, citing people familiar with the matter.
Gilead, whose stock price has climbed about 17% this year on news its remdesivir can tackle the novel coronavirus, was worth $96 billion at Friday’s close. AstraZeneca, with a University of Oxford COVID-19 vaccine project, comes with a market cap of about $140 billion. At the current value, the deal, if completed, would set a new record for pharma M&A, eclipsing Bristol Myers Squibb’s $74 billion acquisition of Celgene last year.

That’s a big if. According to Bloomberg, the talk was in very early stages, as AZ didn’t detail any specific terms and Gilead hasn’t made a decision on how to move forward.
The U.S. biotech doesn’t seem interested in selling. It’s focused on forming its own partnerships and completing smaller acquisitions rather than considering a merger with a big pharma company, the people told the news service.
At least two Wall Street analysts were skeptical of a potential deal. “We do not view this deal as likely,” Jefferies’ Michael Yee wrote in a Sunday note to clients. He pointed out that Gilead believes its HIV franchise, led by fast-growing Biktarvy, is underappreciated and “would prefer to build value over time and do its own tuck-in deals.”

Besides, selling the company only 15 months into the job would be “very early and quick” for CEO Daniel O’Day, Yee said. O’Day has just started executing a turnaround strategy of partnerships and bolt-on acquisitions, as he laid out at the J.P. Morgan Healthcare Conference in January. After the $5.1 billion expansion of its Galapagos collaboration last year, Gilead just waded deeper into oncology with a $4.9 billion acquisition of Forty Seven and a potentially $2 billion partnership with Arcus Biosciences.
Besides, it has yet to maximize the value of remdesivir, Yee added. Since its FDA emergency use authorization for the treatment of COVID-19, remdesivir has attracted great interest across the globe. A team at SVB Leerink recently predicted sales of $1.9 billion this year as Gilead’s expected to start charging for the drug after the initial donated supply runs out around July. Its peak sales estimate? $7.6 billion in 2022, thanks to orders for national stockpiling.
What’s in it for AstraZeneca? That again puzzles industry watchers. In two recent pharma megadeals—BMS for Celgene and AbbVie for Allergan—the acquirers were both suffering from challenged stock prices and “looked at the megamergers as the only way out,” Yee said. But AstraZeneca’s stock price is at an all-time high, buoyed by strong performance from an oncology franchise that includes blockbusters Tagrisso and Lynparza.

Wolfe Research analyst Tim Anderson expressed a similar attitude in his Sunday analysis. “Big deals in big biopharma almost always happen when the bigger company is in a position of weakness,” he said. “AstraZeneca is not in this position.”
Yes, Gilead is actively expanding in oncology and inflammation, which could work with AZ’s own efforts in these fields. But about three-fourths of Gilead’s business lies in HIV, an area where AZ has no presence. And its newfound interest outside of virology implies these projects are likely higher risk—just consider the $12 billion buyout of CAR-T specialist Kite Pharma, which just led to an $800 million write-down. Not to mention, AZ has its own therapies, including Daiichi Sankyo-partnered antibody-drug conjugate Enhertu, in what Anderson called a “pipeline within a product.”
Is there an imminent problem at AZ that would prompt a move to diversify? Anderson said he couldn’t find one, adding that it’s one of those businesses “where it is hardest to come up with plausible, material, bear-case scenarios.” Despite its low cash flow, AZ’s business remains strong, with no big upcoming patent cliffs and no major growth-driving products facing imminent competition, he said.
As for remdesivir, Anderson argued its commercial potential is “still TBD with more questions than answers.” For one thing, Gilead has yet to unveil the sticker price for the antiviral, and it may face a no-win situation amid a pandemic. Even if remdesivir succeeds this year or next, Anderson’s worried it might be hepatitis C all over again, in which a sharp sales increase is followed by a sharp decline—and investors prefer steady revenue streams over a roller coaster, he said.
Anderson doubts this deal will go through, suspecting that “it merely reflects AstraZeneca exploring options as part of its normal business development efforts.”

RBC Capital’s Brian Abrahams appears to be a proponent of the deal, arguing Gilead’s strength in virology could “round out” AstraZeneca’s portfolio, and that its “burgeoning” oncology pipeline could dovetail well with AstraZeneca’s existing offerings.
What’s more important, as the initial excitement over remdesivir is gradually being washed out of Gilead’s stock, the company is trading at 12.5x earnings per share, way below the 20x average for large-cap biotechs or 13.1x for a large-cap pharma, making it a cheap target right now. That might change when O’Day manages to steer the ship around.
Besides, given that Soriot and O’Day previously worked as executives at Roche at the same time, Abrahams figures they may be more willing to work together.
https://www.fiercepharma.com/pharma/astrazeneca-reportedly-wanted-a-merger-gilead-but-does-gileaz-make-sense

As U.S. urges stateside manufacturing, Paratek gambles on ‘onshoring’ effort

Desperate for answers to the COVID-19 pandemic, the U.S. government has shelled out big money for a stable and reliable supply of key drugs made on U.S. soil. For drugmakers accustomed to offshore manufacturing in cheaper countries, does it make any sense to onshore production to meet U.S. demand?
One company has a compelling argument, and it’s taking big risks—and government funding—to test its hypothesis.
Paratek Pharmaceuticals, maker of antibiotic Nuzyra, is kick-starting a three-year plan to build a government-funded, second supply chain in the U.S. in an effort to flesh out the nation’s strategic supply of pandemic response drugs.

The U.S. government, through its Biomedical Advanced Research and Development Authority (BARDA), has dumped more than $300 million combined into helping Paratek build the U.S. supply line, which will stand apart from its current manufacturing network in Europe, CEO Evan Loh said.
It’s a gamble for BARDA but even more so for Paratek, a 22-year-old company facing the rigorous prospect of building that supply chain from scratch. Even with more than a quarter-billion dollars of government money to work with, it’s a risk; Paratek has a guaranteed order for just 10,000 treatment courses of Nuzyra—a “tiny investment,” according to Loh—and no certainty the funding will keep coming.
For Loh, however, the government’s big investment in his company is a sign that the U.S. Department of Health and Human Services (HHS) and BARDA are putting their money where their mouth is in creating a stable U.S. supply of key pandemic response drugs, with lessons learned from COVID-19.
“This is forward-thinking and pressing on the part of BARDA, and I think you’ll see more of this,” Loh said. “This grant that came our way may be an experiment, but I think they’re experimenting with the right company.”
Here’s what Paratek has cut out for it in the next three years.

Starting from scratch

In December 2019, BARDA laid out a deal with Paratek that has become increasingly common during the COVID-19 pandemic.
The government agreed to dole out $285 million as part of BARDA’s Project BioShield program to help the Boston-based drugmaker establish an onshore U.S. supply chain for Nuzyra and fund the drug’s development to treat pulmonary anthrax––an infectious disease best known in the U.S for a series of 2001 attacks that left five Americans dead.
The five-year agreement, with could be extended to 10 years, required Paratek to direct to the Strategic National Stockpile (SNS) 10,000 treatment courses of Nuzrya, which notched its first FDA approvals in October 2018 to treat community-acquired bacterial pneumonia and acute bacterial skin and skin structure infections.
In return, BARDA agreed to fund Paratek’s construction of the U.S. supply chain and back postmarketing studies of the drug to treat anthrax infection. The agency followed up that commitment in April with an additional $20 million in funding for the company’s onshoring efforts.
More could be in the offing, too, BTIG analyst Robert Hazlett figures. “We believe this comprehensive deal is step one of several that could transpire from BARDA, as additional purchases for additional indications are considered,” he said.

The road to FDA approval was a long one for Nuzyra, first synthesized in 1996. Paratek launched two years later with the goal of producing antibiotics to aid public health response. It’s a market marked by failures and meager profits despite desperate demand from federal regulators.
Loh, who made the switch to Paratek in 2014 after a stint as senior vice president in Pfizer’s R&D group, said Paratek was burdened in its early years with a high barrier for regulatory approval and steep clinical and manufacturing startup costs. The company cycled through some 20-plus phase 1 clinical trials for Nuzrya and three phase 3 trials—each at a cost of about $40 million out of pocket—all in an attempt to enter a market that is “fragile and failing,” Loh said.
Those years in the wilderness, however, gave Paratek the opportunity to develop a “stable and high-quality supply chain” in Europe that may have enticed BARDA to work with the company, Loh said. Despite the inherent risk in the government’s contract, the deal comes with benefits for the drugmaker’s aspirations.

According to Jason Burdette, Paratek’s head of technical operations, the drugmaker will onshore production of Nuzyra’s active pharmaceutical ingredient (API) from U.S.-sourced raw materials. That API will be used in intravenous and oral versions of the drugs at facilities operating under increased BARDA security requirements. Every facility involved will need FDA approval—and to meet its BARDA commitments, Paratek will need those approvals within three years.
With the U.S. and EU supply chains running in tandem, Paratek will have the necessary “speed and agility” to supply the BARDA stockpile in case of increased demand, Burdette said, and a dual supply point will also be a boon for the drugmaker.
“For us, we could not afford to have a fail anywhere along (our European) supply chain,” Loh said, citing the high quality required and middling demand for the drug in the early stages of its launch. “Our supply chain is not the most cost-efficient today. I think it will get more cost-efficient, but the cost efficiency comes with more volume.”
The move to build its U.S. supply will come with “incremental costs” of doing business, including higher wages and more stringent demands from BARDA, but Paratek is aiming to mitigate those new costs with a more streamlined production network.
“We probably would not have been able to go to the U.S. based on the incremental costs unless we had this public-private partnership with BARDA,” Loh said. “That really enabled us to be able to do that, and I’m proud to be able to do that because I don’t think there’s been any other company that’s really made that commitment.”

Any followers?

Paratek’s gamble on government money might be a boon in the long term, but whether any other drugmakers follow its lead and develop their own U.S. supply lines is unknown, given the relatively high costs of manufacturing stateside.
However, Loh argued that HHS and BARDA have shown a willingness in recent years to make meaningful, big-dollar commitments to restock the SNS––and that could mean more opportunities for drugmakers producing pandemic response drugs, including those used to treat influenza and pneumonia.
“I think that movement is coming,” Loh said. “As I talk to the leaders at HHS, they are very consistent in terms of what they have always said to us. They have two mantras: to protect the warfighter, and to save lives and protect Americans.”

Examples of the government’s renewed interest in pandemic response have been seen in a slew of major commitments BARDA has made in recent weeks to companies supplying strategic drugs.
Earlier this week, Emergent BioSolutions won a $628 million deal with the government to scale production of targeted COVID-19 vaccine candidates to make “tens to hundreds of millions” of doses available through 2021, the CDMO said.
As part of the agreement, the government will shell out $542.7 million to reserve bulk manufacturing capacity at Emergent’s Baltimore Bayview facility, which was constructed as part of a BARDA pandemic preparedness contract signed in 2012. The remaining $85.5 million will be spent expanding fill/finish capacity at two Emergent plants at Camden in Baltimore and Rockville, Maryland.

In late May, BARDA also floated a four-year, $354 million contract with a fledgling company, Phlow Corporation, to build a generic medicine and API plant in Richmond, Virginia, and supply COVID-19 treatments produced there. That deal can be expanded up to 10 years and a total of $812 million, making it among the largest in BARDA’s history.
Those deals could soon become a sign of the times as the U.S. realizes the need for a stable supply of homegrown drugs during a pandemic. For Paratek and Loh, a renewed and lasting commitment to that supply could be a boon in the coming years after three hard years of work are complete.
“This is going to be a very broad-based effort to look at the SNS, and I’m very optimistic that the current administration will continue to support that,” Loh said.
https://www.fiercepharma.com/manufacturing/as-u-s-calls-for-stateside-manufacturing-antibiotic-maker-paratek-gambles-onshoring

Oxford Biomedica snags manufacturing gear to ramp production of Covid-19 vax

In the race for a COVID-19 vaccine, the University of Oxford has stormed to an early lead with the commercial manufacturing support of British drugmaker AstraZeneca. Now, in an effort to scale up capacity for global demand, one of AstraZeneca’s manufacturing partners has struck a deal for new equipment.
Oxford Biomedica has inked a five-year deal with the U.K.’s Vaccines Manufacturing and Research Institute (VMRI) to build out the CDMO’s Oxbox facility to help produce doses of the university’s adenovirus-based COVID-19 vaccine.
As part of their deal, VMRI will supply manufacturing equipment for two suites at Oxford Biomedica’s 84,000-square-foot Oxbox facility in Oxford, U.K., the CDMO said. The suites will be dedicated to producing Oxford’s vaccine, AZD1222, but can also be used to manufacture other viral vector vaccines.

In return, Oxford Biomedica will provide VMRI with “training and technical assistance” for its staff to scale up manufacturing of viral vector vaccines at its new facility at the Harwell Science and Innovation Campus at Oxford scheduled to open in mid-2021.
The manufacturing supply agreement will help Oxford Biomedica begin churning out doses of Oxford’s vaccine candidate––which is currently in phase 2/3 trials in the U.K.––beginning this summer.

Late last month, Oxford and British drugmaker AstraZeneca agreed to a one-year deal covering “multiple batches” of the university’s vaccine as part of a consortium aimed at speeding production of the shot.
As part of the agreement, AstraZeneca received access to the OxBox facility with the goal of supplying clinical and commercial doses through 2020 with the possibility of expansion in the future.
AstraZeneca and the university agreed to tie up in April, with the drugmaker taking on commercialization and large-scale manufacturing of the school’s vaccine, which was developed by Oxford’s Jenner Institute.

As Oxford Biomedica aims to ramp up its own manufacturing, AstraZeneca recently secured a massive tie-up to bring billions of doses of AZD1222 on the market in the coming years.
Last week, the British pharma inked a $750 million deal with the Coalition for Epidemic Preparedness Innovations (CEPI) and Gavi, the Vaccine Alliance to manufacture and distribute 300 million doses of Oxford’s vaccine by the end of 2020, the drugmaker said Thursday.
AZ also agreed to a licensing deal with the Serum Institute of India to provide 1 billion doses of the vaccine to low- and middle-income countries, with the goal of 400 million produced by year’s end. In total, the deals bring AstraZeneca’s overall supply capacity for Oxford’s vaccine to more than 2 billion doses per year, the drugmaker said.
https://www.fiercepharma.com/manufacturing/oxford-biomedica-reaches-manufacturing-equipment-deal-to-ramp-up-production-covid-19

Aimmune’s Palforzia shows durable effect in study

Aimmune Therapeutics (AIMT +3.6%) announces positive data from a follow-on study to its Phase 3 PALISADE trial of peanut allergy product Palforzia [peanut (Arachis hypogaea) allergen powder-dnfp].

At year 2, patients dosed daily showed ongoing immunomodulation and higher rates of desensitization that increased over time compared to non-daily-dosed patients while experiencing lower rates of adverse events. 80% of these patients who underwent a food challenge demonstrated desensitization to 2,000 mg of peanut protein (~14 kernels), higher than the non-daily group.

The FDA approved Palforzia in January.

https://seekingalpha.com/news/3581128-aimmunes-palforzia-shows-durable-effect-in-study

Surmodics SurVeil device CE Mark’d

Surmodics (SRDX +3.5%) announces CE Mark certification of its SurVeil drug-coated balloon used to treat peripheral artery disease (PAD).

The action triggers a $10.8M milestone payment from exclusive licensee Abbott (ABT +0.9%). Under the terms of the agreement, SRDX is responsible for manufacture and supply.

The device is not yet available in the U.S.

https://seekingalpha.com/news/3581155-surmodics-surveil-device-ce-markd

Kiniksa’s mavrilimumab shows encouraging effect in COVID patients

Kiniksa Pharmaceuticals Ltd (NASDAQ:KNSA) announces 28-day data from an open-label study testing mavrilimumab in 13 hospitalized severely ill COVID-19 patients with pneumonia and hyperinflammation who received a single IV dose of 6 mg/kg of the granulocyte macrophage colony stimulating factor receptor alpha (GM-CSFRα) inhibitor. The results were virtually presented at EULAR.

After 28 days of follow-up the mortality rate was 0% compared to 27% (n=7/26) in a control group (26 non-mechanically ventilated patients with similar baseline characteristics).

8% (n=1/13) of patients in the mavrilimumab group progressed  to mechanical ventilation versus 35% (n=9/26) in the control group

100% (n=13/13) of patients in the mavrilimumab group achieved the clinical improvement endpoint compared to 65% (n=17/26) in the control group.

A Phase 2/3 study is next up.

https://seekingalpha.com/news/3581093-kiniksas-mavrilimumab-shows-encouraging-effect-in-covid-patients

Applied DNA updates on COVID-19 vaccine program

Applied DNA Sciences (NASDAQ:APDN) is up 9% premarket on the heels of an announcement related to the development of linear-DNA form of COVID-19 vaccine candidates with development partner Takis Biotech.

The results of linear-DNA dose-response trials are expected in this month.

The companies’ development program utilizes the plasmid-based DNA templates to determine baseline results in preclinical animal models.

Th results are anticipated to reduce risk of antibiotic resistance and genomic integration, and speed of production.

If found to be as efficacious as the plasmid-based templates, the company and Takis will engage a third-party to conduct toxicology studies to generate necessary data for potential human clinical trials of the linear-DNA vaccines.

https://seekingalpha.com/news/3581095-applied-dna-updates-on-covidminus-19-vaccine-program