JP Morgan 2023 – day one sees buyers make the most of straitened times

Takeouts of Cincor, Albireo and Amryt emerge with contingent payment terms, as biopharma buyers flex their muscles.

Three billion-dollar bolt-on buyouts emerged on the first day of the JP Morgan healthcare conference, delivering more of a bang than last year's relatively quiet opener. But the terms involved should leave no one in doubt that this is now a buyers’ market.

All involved contingent payments, a risk-mitigation strategy that is likely to become more common if poor market conditions persist. True, the target companies – Cincor, Albireo and Amryt – managed to extract ostensibly healthy premiums, but all three transactions come in the wake of poor share price performances.

In Albireo and Amryt’s cases, investors are being asked to accept very little premium compared to where these two groups have traded in the past couple of years. And, while those who participated in Cincor’s January 2022 IPO are getting a decent enough premium, shareholders who backed the group’s secondary fundraising in August will be sitting on a loss.

With markets showing few signs of picking up, more developers will be faced with difficult choices in the coming months. Accept a risk-sharing structure, or grapple with potentially months more of share price stagnation? Acquirers’ power will only grow if there is just one serious bidder at the table, which is possibly what happened in these three situations.

Perhaps investors should be encouraged to see that deals are getting done. As well as the $3bn pledged in buyouts, the first day of JP Morgan also saw several licensing transactions emerging.

Another thread here is that all buyers are European – over to US biopharma to keep the M&A ball rolling in 2023.

Astrazeneca and Cincor

Astrazeneca’s opportunistic move on Cincor looks likely to succeed – the UK pharma giant has offered to buy the mid-stage, single-asset company for an initial $1.3bn. The $26 per share price is 121% above Cincor’s share price on Friday, but only 63% above the level at which the company floated almost exactly one year ago. Those who backed a $30 per share equity raise in August will be even more disappointed.

A further $500m is payable on submission “of a baxdrostat product” to the FDA or EMA as part of a $10 per share CVR (contingent value right).

In the wake of disappointing phase 2 data last year some might consider this a good outcome. Cincor is developing baxdrostat for treatment-resistant hypertension, but the failure of the Halo trial raised the risks for this project as it approaches pivotal development.

Baxdrostat had looked encouraging in a previous trial, and there is certainly a need for new options to bring down stubbornly high blood pressure. Astrazeneca now joins Johnson & Johnson as one of two big pharma names in resistant hypertension – the latter is partnered with Idorsia.

Ipsen and Albireo

Baxdrostat was originated by Roche, and the second deal today, Ipsen’s $952m buyout of Albireo, also concerns a big pharma cast-off. This buyout was struck mostly for Bylvay, an IBAT inhibitor that was spun out of Astrazeneca back in 2008, when Albireo was set up. The drug is being developed in various rare liver conditions and has been on the market since 2021.

Jitters around Bylvay’s launch hit Albireo’s stock last May, and it never really recovered. Ipsen’s $42 per share offer represents a 104% premium to Albireo’s one-month prior average share price; the biotech’s stock touched a high of $37 last year, ahead of the correction.

As such, Albireo investors might be disappointed with the terms, particularly since the potential vesting of the $10 per share CVR could be a long way away. The payout hinges on FDA approval of Bylvay in biliary atresia by the end of 2027; the phase 3 Bold study recently completed enrolment in this setting. Data readout was targeted for the end of 2024, but today’s statement implies that the trial might need upsizing.

Ipsen has been on something of a buying spree recently, snapping up Epizyme last June and buying rights to Genfit’s Nash project elafibranor in late 2021.

Chiesi and Amryt

Finally, Amryt also found the approaches of a larger developer too tempting to ignore: the private Italian firm Chiesi has offered $1.3bn up front for the rare disease player. A further $225m is on the table, contingent on FDA approval of the epidermolysis bullosa (EB) product Filsuvez before the end of 2024 (worth $1.0 per ADS), and the receipt of a priority review voucher (worth a further $1.50 per ADS).

The $14.50 per ADS initial payment represents a 107% premium to Amryt’s ADS price on Friday, and is almost bang on the stock’s all-time high, touched in early 2021. The Ireland-listed group has seen its valuation drift since then, in line with the wider market but also owing to commercial and regulatory struggles with Filsuvez.

Payers baulked in Europe, where the EB product was approved in mid-2022, while the FDA has refused to grant a green light, a decision that Amryt has challenged. This now becomes Chiesi’s problem, as does pushing the products that Amryt took over from Aegerion after that group collapsed into bankruptcy.

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