Astra’s Soriot finds hidden value in private assets
When AstraZeneca’s chief executive, Pascal Soriot, recently said he did not need a large acquisition he was not joking. Instead, he has aggressively pursued a series of small deals, seeking value in little-known private or near-private businesses.
Certainly, today’s acquisition of the US inhaled technology player Pearl Therapeutics for up to $1.15bn looks pricey, and the lead projects are somewhat underwhelming. But the outlay could be justified by follow-on products and an inhalation technology that is perhaps the jewel in Pearl’s crown.
The Pearl deal comes hot on the heels of Astra’s takeover last month of Omthera Pharmaceuticals, a business that had floated on Nasdaq less than seven weeks earlier. AlphaCore Pharma, a private cardiovascular company, had been bought the previous month for an undisclosed amount.
Meanwhile, in March Astra handed over an extraordinary $240m to Moderna Therapeutics, a three-year-old mRNA specialist, in an early-stage research alliance. Such transactions show that Astra offers deal bankers plenty of opportunities for business, even if they do come up short of the transformative move that EP Vantage has argued for (No quick fixes, but Astra's Soriot can still be bold, March 18, 2013).
The most obvious reason behind the Pearl acquisition is Astra’s desire to strengthen its presence in the respiratory space, a hot area in which the UK company has been losing ground.
However, Pearl’s lead chronic obstructive pulmonary disease project, PT003, is in itself hardly a game changer. It is a fixed-dose combination of two established drugs, the LAMA glycopyrrolate and the LABA formoterol, and Astra looks like it is coming to the party somewhat late in the day.
GlaxoSmithKline’s LAMA/LABA combination Anoro (umeclidinium plus vilanterol) is already awaiting US approval, while Novartis’s QVA149 (glycopyrrolate plus indacaterol) has been filed in Europe and Japan. Boehringer Ingelheim expects to receive US approval for its LABA olodaterol shortly, though little is known about its combination with the blockbuster LAMA Spiriva. Forest’s aclidinium plus formoterol recently yielded good phase III data, but is a somewhat underwhelming twice-daily dosed project.
Not only could Astra be fourth to market or worse, Panmure Gordon analysts wrote this morning that there might be patent issues around glycopyrrolate; Novartis has patented combinations of glycopyrrolate with LABAs, although this might be too broad to enforce.
Still, the analysts concluded that the Pearl acquisition was “strategically important and had to be done”. After all, Astra’s bet is backend loaded, with the $560m up-front fee effectively paying for PT003 and Pearl’s formulations of its standalone components, PT001 and PT005.
Of course no consensus data are available for these, but 2018 sales forecasts of $882m for Anoro and $913m for QVA149 indicate what the potential might be – even for a late market entrant.
And beyond Pearl's lead it is PT010, a triple combination of a LAMA, LABA and steroid, that could give Astra a truly novel COPD project. Although this has yet to enter the clinic Astra has floated the possibility of advancing it quickly into phase II; developmental and regulatory milestones for PT010 will account for much of the takeover’s $450m of contingent payments, with sales-based milestones of $140m making up the remainder.
Thus the real value of the acquisition could lie in PT010 and future products formulated in Pearl’s pressurised metered-dose inhaler. Pearl says this uses porous particles to create stable suspensions that are deposited throughout the lung rather than orally, giving reproducible dosing, and boasts of having been able to advance several projects into clinical trials within seven to nine months of starting formulation work.
Certainly, Pearl’s key backers, Clarus Ventures, 5AM Ventures, New Leaf Venture Partners and Vatera Healthcare Partners, should be pleased with the result of their company’s trade sale. Even if the downstream payments are never triggered they will have made a handsome gain, having put just $167.5m into Pearl so far.
Now the deal is done Astra will keenly await results of two large phase III studies, Pinnacle 1 and 2, due to read out late next year. Interestingly enough, both of these test PT003 dosed twice daily – even though competitors have strongly pushed the convenience of once-daily dosing with Anoro, QVA149 and Spiriva/olodaterol.
Given the potential disadvantage of twice-daily dosing Astra might therefore be looking for a knockout phase III result. By the end of 2014 the UK company should have a good idea as to whether it will make a decent return on its $560m bet.
|Pearl's phase III trials of PT003
|1,527 patients, PT003 vs PT005 vs PT001 vs Spiriva vs placebo
|1,200 patients, PT003 vs PT005 vs PT001 vs placebo