Celgene’s record-breaking deal hangs on phase II data

Celgene must have seen something absolutely earth-shattering in the phase II data. At least this is the hope its investors must now cling to as they try to rationalise the group’s decision to fork out a massive $710m for Nogra Pharma’s GED-0301.

Until yesterday the Crohn’s disease project was virtually unknown – as was Nogra itself – and only early human data on it are available. But Celgene has touted the still unpublished results of a phase II study that it saw in due diligence as one reason for handing across what EvaluatePharma data compute to be the largest up-front payment in biopharma history (see table below).

GED-0301 is an orally dosed antisense DNA oligonucleotide that Celgene claims has the potential to redefine the standard of care in Crohn’s disease. The only human data available, from a non-placebo-controlled 15-patient trial, showed an average reduction in Crohn’s disease activity index from 287 to 89 by day 8.

But the real promise lies in a 166-patient phase II trial that measured remission rates after 15 days’ treatment as its primary endpoint. Celgene said these data had been submitted to a major medical journal, and based on them it plans to start phase III by the year-end.

On a call yesterday the company said the results showed a very robust response that was “very different from anything in the market today”, with many patients going into remission quickly. It also played up the antisense delivery system, which yielded absorption that gave GED-0301 an enhanced safety profile.

Competitive

But can all this really be worth $710m up front, plus almost $2bn in milestones and a tiered double-digit royalty?

The privately held Nogra Pharma must have been bargaining from a position of extreme strength, and Celgene confirmed that the bidding process had been highly competitive. Investors seemed unconvinced yesterday, sending Celgene down 2.5%, though this was probably largely due to missed first-quarter revenue estimates.

Nogra is actually the new incarnation of the Italian firm Giuliani, and has a tax-friendly Ireland domicile – one reason for the high valuation. UBS analysts praised Celgene for licensing in an asset that has blockbuster potential and can have a favourable impact on tax; the group already has an effective tax rate of barely 13%.

But the fact remains that $710m is the richest pure up-front payment in biopharma history, according to EvaluatePharma data. The next highest seems to be the $518m handed over last October by Switzerland's Sellas to gain rights to two of Fosun’s projects for lung cancer and diabetes, though the precise nature of this payment is unclear.

Biopharma's biggest licensing deals by up-front payment
Project In-licensing company Source company Deal date Status on deal date Up-front payment ($m)
GED-0301 Celgene Nogra Pharma 2014 Phase II 710
Fotagliptin benzoate & pan-HER inhibitor Sellas Life Sciences Group Fosun International 2013 Preclinical 518
Bardoxolone methyl AbbVie Reata Pharmaceuticals 2010 Phase II 450
Tradjenta & empagliflozin Eli Lilly Boehringer Ingelheim 2011 Phase III 409
RTA 403 & TRA 404 AbbVie Reata Pharmaceuticals 2011 Preclinical 400
Abilify Bristol-Myers Squibb Otsuka Holdings 1999 Phase III 400
Roxadustat AstraZeneca FibroGen 2013 Phase III 350
Alnylam/Roche RNAi collaboration Roche Alnylam Pharmaceuticals 2009 Research project 289
OBP-601 Bristol-Myers Squibb Oncolys BioPharma 2010 Phase II 286
Eliquis Pfizer Bristol-Myers Squibb 2007 Phase III 250
Nexium OTC Pfizer AstraZeneca 2012 Filed 250
Dimebon Pfizer Medivation 2008 Phase III 225
Fanapt Novartis Titan Pharmaceuticals 1997 Phase II 218
Cabozantinib Bristol-Myers Squibb Exelixis 2008 Phase III 212
Erbitux Bristol-Myers Squibb ImClone Systems 2001 Phase III 200
Tanezumab Eli Lilly Pfizer 2013 Phase III 200
TC-5214 AstraZeneca Targacept 2009 Phase II 200
Abilify Maintena Lundbeck Otsuka Holdings 2011 Phase III 200
Kynamro Genzyme Isis Pharmaceuticals 2008 Phase III 175
ABT-110 (PG110) Abbott Laboratories PanGenetics 2009 Phase I 170
Excludes equity investments, marketed products and company acquisitions. Source: EvaluatePharma.

Arguably, AbbVie shelled out more in licensing rights to Reata’s bardoxolone and related compounds, though the combined $850m was actually paid in two separate deals. The table also excludes marketed drugs – such as the Tysabri interest Elan sold to Biogen Idec for $3.25bn – and equity investments like Sanofi’s recent $700m endorsement of the RNAi company Alnylam.

Among other major licensing transactions whose signing fees were not pure up-fronts, it is worth mentioning Bristol-Myers Squibb’s Erbitux deal, which additionally involved a $1bn equity stake in its developer, ImClone Systems, and Johnson & Johnson’s $650m takeover last year of Aragon for that firm’s prostate cancer project ARN-509.

For now Celgene remains understandably upbeat, though curiously a phase II long-term extension study of GED-0301 seemed to have been prematurely ended. Whether this is something investors need to worry about is not clear, but the history of licensing shows that paying a lot up front is no guarantee of success (In licensing, you don’t always get what you pay for, July 23, 2013).

Indeed, Reata’s bardoxolone blew up spectacularly, Targacept’s TC-5214 failed phase III, and Roche’s Anlylam deal was terminated when the Swiss firm ditched RNAi.

Until the phase II data are published investors will just have to trust Celgene's shrewd history of deal-making and take the company at its word. 

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobEPVantage on Twitter

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