Nobody can say that Allergan is letting the grass grow under its feet. The speciality pharma group went on a two-day spending spree that could allow it to extend the life of two of its key franchises: ophthalmology and migraines.
The deals, one a licence and the other an acquisition, sees Allergan enter new technologies in both sectors as it gets two anti-CGRP agents from Merck & Co and a neurostimulation device from a Stanford University spinout. In migraine in particular, Allergan was at risk of missing out on the next generation of agents and of losing the lead it gained with Botox.
Another $375m gone
The $375m committed in the last two days is small by Allergan’s spendthrift ways, and came even as the group said it would bring its debt load down following the $70.4bn transaction that allowed the former Actavis to acquire Allergan and assume its name (Allergan gets its happyish ending, November 18, 2014). It also follows by just a couple of weeks the $2bn takeout of Kythera to add to Allergan’s aesthetic dermatology portfolio.
Of that total, $250m has been earmarked for Merck to take on MK-1602 and MK-8031, both oral antagonists of calcitonin gene-related peptide (CGRP) receptors. There is much competition in this space, with Amgen, Lilly, Teva Pharmaceutical Industries and Alder Biopharmaceuticals testing biologicals; the Merck projects represent the only two clinical CGRP assets that have been identified as small molecules.
MK-1602 could enter phase III in 2016 after end-of-phase II meetings with the FDA. MK-8031 could begin phase II next year. A third CGRP agent, MK-0974, had been abandoned because of liver toxicity issues, and Allergan was quick to emphasise that the two projects it had licensed had shown no such adverse events, and belonged to a different chemical series.
After Botox was approved to treat migraines in 2010 it has assumed the mantle as the top-selling drug in the indication at a forecast $461m this year, according to EvaluatePharma’s consensus. This has been helped, no doubt, by patent expiries in the triptan class, which peaked in sales at more than $3bn before 2010.
Botox faces its own loss of market exclusivity in 2020. Allergan has queued up Semprana as a successor, although its fate obviously hangs by a thread after two rejections by the FDA (Allergan’s pipeline takes its turn in the spotlight, July 1, 2014). Licensing in the Merck projects suggests that Semprana’s progress has not been going well.
Allergan will pay $125m immediately and another $125m in April 2016. Development and commercial milestones and double-digit royalties are also part of the deal.
Allergan's medtech deal is also worth $125m, an amount that bought it the private company Oculeve. With that, Allergan made a rare foray into medical devices – Oculeve’s lead programme is OD-01, a nasal insert that stimulates tear production in dry eye patients.
Dry eye is a space in which Allergan already has a presence in the form of Restasis, its second-biggest product by sales. There is a competitive threat from Shire’s lifitegrast, which could see approval later this year.
Restasis is an ophthalmological formulation of an old drug, cyclosporine, priced at the less expensive end of the spectrum at just over $300 a year per patient. Lifitegrast is a novel agent, the first drug in its class to get approved should the FDA say yes, and as such would probably be priced higher.
It has the advantage of having relieved the signs and symptoms of dry eye as opposed to the simple improvements in eye wetting as Restasis as done, so might be able to justify a higher price to payers.
Thus Allergan is in need of a project to respond to the lifitegrast threat, and OD-01 looks like one. It will conduct two pivotal trials and hopes to submit the device for approval in 2016. Oculeve’s investors, which include Kleiner Perkins Caufield & Byers, Versant Ventures and New Enterprise Associates have got a decent exit after ploughing just $24m into the group in about four years.
In spite of having borrowed $26bn in the past year to score the big tie-up, Allergan still does not appear afraid to achieve growth through dealmaking in pre-commercial assets. If its pledge to trim its debt load is to be believed, some cost reductions and job cuts must be in the offing too.