Baffling Valeant strikes for troubled Astra psoriasis project

News

If Valeant’s $1bn acquisition of Sprout for its controversial female libido pill were not confusing enough, its $100m deal announced today to license AstraZeneca’s chequered psoriasis project brodalumab ought to have incited a round of head-scratching among pharma watchers.

Despite the Canadian group’s presence in dermatology, taking on an agent that Amgen believed would end up with a warning for suicidal ideation and behaviour looks like a daring bet. Expectations for the antibody have plummeted this year with news of this safety signal; Valeant appears to be counting on a first-cycle approval, and on marketing muscle that can allow it to compete against Cosentyx, which has a cleaner safety profile.

Doubtful outlook

The Astra deal grants Valeant rights to brodalumab outside Japan and the Asian markets where Kyowa Hakko Kirin is the licensee. For $100m up front, up to $170m in pre-launch and up to $175m in post-launch milestones, Valeant earned the right to pay for remaining development costs as well as to share profits with Astra.

Brodalumab, a monoclonal antibody working on the IL-17 target, was in the thick of a race to be part of the next major group of psoriasis agents, a competition that included Novartis’s Cosentyx and Lilly’s ixekizumab. Astra and Amgen, its originator, had been developing it together under a 2012 deal, but the California-based biotech withdrew when the threat of a label warning about suicide became real, leaving Astra holding the bag (All eyes on brodalumab fallout, May 26, 2015).

That news prompted a round of downgrades. In February 2015, the EvaluatePharma consensus forecasted $408m in sales in 2020; that number has tumbled to $43m. Analysts from Bank of America, Barclays and Citi, to name three, removed the project entirely from their Astra sales forecasts.

Valeant shares fell 2% to $225.30 in early trading today. Amgen’s firm decision to abandon an agent born in its very own laboratories – the company believed that the labelling requirements would limit the population too severely – is a sign of how cautiously investors should view Valeant's decision.

What possible gain?

In a note today, ISI Evercore analyst Umer Raffat spelled out the advantages of the deal – like Salix Pharmaceuticals’ Xifaxan 550, brodalumab is in theory a launch-ready asset. Tying most of the deal value to regulatory and sales milestones is a wise move, Mr Raffat wrote, which it undoubtedly is, given the risk surrounding this project.

However, Valeant’s assumption of the remaining development costs is a chancy aspect of the deal, since even if regulators approve the project they might ask for post-approval studies because of the suicide signal. That could easily add significantly to the $100m up-front fee.

It could be that Valeant and its chief executive, Michael Pearson, are crazy like a fox, and that they believe that maintaining the furious pace of deal-making is the way to keep investors happy. Too many expensive and unwise deals could disrupt that delicate balance. Sprout and brodalumab raise the odds of that happening.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter

Share This Article