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.
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.