A few stars shine among the most valuable unpartnered assets

Analysis

A look at the unpartnered assets currently attracting the biggest valuations from analysts reveals a mixed bunch of compounds. The analysis below, using NPV data from EvaluatePharma, reveals a couple of agents that potential partners are likely to be watching, including Synta’s ganetespib, Synergy’s plecanatide and Puma’s PB272.

However it also throws up a number of products that have long been sitting on the shelf. Big pharma’s quest for pipeline replacement over the last few years means that few promising compounds being developed by smaller drug developers make it to phase III without being cornered – those that do are often there for a reason. Hence the presence of the likes of Oncolytics’ Reolysin and Mannkind’s Afrezza in the list - despite equity analysts’ optimistic sales forecasts it seems unlikely these products’ sky high potential valuations will be achieved (see table).

Sticking around

The table below shows the top 15 pipeline candidates according to their net present value, based on currently available consensus analyst forecasts. The list does not include products already partnered in a major market or in the hands of a company capable of commercialising its own drugs.

EP Vantage conducted the same analysis almost two years ago, and a couple of products are still present – Oncolytics’ oncolytic virus, Reolysin and MannKind’s inhaled insulin Afrezza (Most valuable unpartnered pipeline assets - what's hot and what's not, August 25, 2011).

Critical phase III head and neck cancer data are due later this year which will help determine whether the analysts that have remained faithful to Oncolytics’ high risk project with bullish sales estimates are justified. The company’s market cap illustrates that investors do not share this heady optimism.

MannKind is in a similar situation, with data due from two phase III trials, called Affinity, in mid-August. Afrezza remains a controversial product that has taken years of research and consumed more than $1bn in R&D spending over the last decade. Many believe that positive results will finally lead to the big pharma takeover that they believe has been in the wings for years. However the potential of inhaled insulin is questionable on many levels and Afrezza could still disappoint.

Success or failure, it seems unlikely that either Oncolytics or MannKind will feature in the same analysis two years from now.

Split opinions

Like Oncolytics, several other candidates in the list betray a wide split in opinion between optimistic equity analysts and stock market investors.

Inovio, for example, whose HPV vaccine has an NPV substantially higher than its market cap. Phase II data is due in the first quarter of 2014 on the product, which treats cervical intraepithelial neoplasias, precursors to cancer that are caused by the human papillomavirus. Existing vaccines only work to protect women before they contract HPV.

Synta also has some way to go to prove the value of its cancer drug, ganetespib. Interim phase III data is not due until the end of this year and any deal seems unlikely to emerge before then, particularly given the company’s convoluted and confusing attempts to find a way forward for the compound (Synta’s hitchhike through Galaxy takes another strange twist, October 1, 2012).

Synergy bulls meanwhile reckon that the company’s valuation could rise as phase IIb data emerges from its plecanatide programme over the coming 12 months – and tempt potential partners.

Insmed is developing an inhaled antibiotic Arikace to treats respiratory infections in two orphan disease markets: cystic fibrosis and non-tuberculous mycobacteria. Phase III data in CF patients are due mid year and the company plans to launch alone in Europe and Canada first, following in the US market a few years behind. Many hope a partner will emerge given the product’s attractive positioning in an orphan indication.

Merrimack is also struggling to prompt investor excitement despite its relatively recent debut on the stock market a year ago (Merrimack limps along to the next data readout, April 5, 2013). Forecasts for MM-398 are certainly best case considering how tough it is to show any impact on pancreatic cancer; phase III data due towards the end of the year will reveal whether this is a prize unpartnered asset.

NewLink Genetic and Sunesis meanwhile were both flagged in another recent analysis of companies likely to fail in their quest (Ten oncology companies to avoid, February 14, 2013). Small companies with phase III assets are partner-less for a reason, the theory goes. Pivotal data due from both companies next year will reveal whether they can prove naysayers wrong.

Prize assets?

Some assets on the list do seem to be exciting investors as much as analysts.

Tesaro’s rolapitant is emerging as a potentially competitive new entrant to treat chemotherapy induced nausea, belonging to the same class of drug as Merck & Co’s Emend. Phase III data due later this year will be key to triggering any movement on partnerships.

Acadia followers have long been hoping for a partner on pimavanserin, although the company’s recent move to raise money suggests that tempting offers have not emerged (Acadia taps market for cash again as FDA filing approaches, May 15, 2013).

Puma’s pan-HER2 inhibitor neratinib is in a broad phase II programme with data due later this year that shed more light on the drug’s potential. Similar to GlaxoSmithKline’s Tykerb, the agent is shaping up to be a more effective compound. Run by the same management team that successfully sold Cougar Biotechnology to Johnson & Johnson for almost $1bn, some investors are already betting the trick can be repeated at Puma.

Another company with the weight of expectation already priced in is Sarepta, an orphan drug darling working in muscular dystrophy. The company is waiting to find out whether it can file for accelerated approval for eteplirsen, something it needs confirmed to justify its current valuation, and help tempt any interested partners (Sarepta wobble underlines need for perfection, April 16, 2013).

Lessons from history

Some of the companies below will no doubt succeed in attracting a partner, however track records tell us it will not be a big proportion. Of the 15 analysed two years ago, only three managed it. Most notably Pharmasset was bought by Gilead for access to its hep C asset for a huge $11bn. ThromboGenics sealed a very respectable ex-US deal with Novartis over what is now called Jetrea and Ardea was bought out by AstraZeneca, for $1.3bn.

At this stage Sarepta, Tesaro and Puma look most likely candidates to succeed.

Most valuable unpartnered pipeline assets by consensus NPV
Potential revenues in 2018
Rank Product Lead Indication Company Pharma Class Status Today's NPV ($m) Market Cap ($m) Sales ($m) Royalties ($m)
1 Reolysin Head and neck cancer Oncolytics Biotech Oncolytic virus  Phase III 3,870 233 1,127 76
2 Afrezza Diabetes MannKind Insulin Phase III 1,976 1,812 286 175
3 VGX-3100 cervical dysplasia Inovio Pharmaceuticals HPV vaccine Phase II 1,825 126 300 -
4 Ganetespib Non-small cell lung cancer Synta Pharmaceuticals Hsp90 inhibitor Phase III 1,625 511 459 67
5 Plecanatide Constipation Synergy Pharmaceuticals Guanylate cyclase type-C receptor agonist Phase III 1,484 455 710 -
6 Arikace Cystic fibrosis respiratory infections Insmed Aminoglycoside Phase III 1,206 396 449 -
7 MM-398 Pancreatic cancer Merrimack Pharmaceuticals Topoisomerase I inhibitor Phase III 1,196 491 375 -
8 Rolapitant Chemotherapy induced emesis  TESARO NK1 antagonist Phase III 1,139 1,130 408 -
9 ACP-103 Parkinson's disease psychosis ACADIA Pharmaceuticals 5-HT2A (serotonin) antagonist Phase III 1,102 1,165 465 3
10 PB272 Breast cancer Puma Biotechnology pan-HER inhibitor Phase III 1,020 1,052 349 -
11 HyperAcute Pancreas Pancreatic cancer NewLink Genetics Cancer vaccine Phase III 960 398 447 21
12 Eteplirsen Duchenne muscular dystrophy  Sarepta Therapeutics Muscular dystrophy antisense Phase II 880 1,159 776 -
13 APF530 Chemotherapy induced emesis  A.P. Pharma 5-HT3 (serotonin) antagonist Filed 852 134 277 -
14 Vosaroxin Acute-myeloid leukaemia Sunesis Pharmaceuticals Naphthyridine analogue Phase III 821 284 268 10
15 ARX-01 Post-operative pain AcelRx Pharmaceuticals Mu opioid agonist Phase III 794 270 257 12

To contact the writer of this story email Amy Brown in London at AmyB@epvantage.com or follow @AmyEPVantage on Twitter

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