Pfizer turns to private equity for second round of pipeline divestments

Bain Capital’s investment in a clutch of Pfizer neurology projects raises the question of what interest private equity might have in financing risky biopharma research and development.

Bain Capital and Pfizer do not seem like the most obvious partners for a new neuroscience drug development company. The exit horizon of private equity is typically five years or less, barely enough time for the new entity, Cerevel Therapeutics, to complete the clinical and regulatory work necessary to get its lead Parkinson’s disease asset to market.

Yet this is the second time in as many years that Pfizer has turned to Bain to finance a private vehicle for a therapeutic portfolio – and Bain has shown that it is willing to be patient with biopharma investments.

Making a biopharma splash

Bain is putting $350m into Cerevel, which will advance three unnamed clinical-stage central nervous system projects and an undisclosed number of preclinical assets. The news comes 10 months after Pfizer, which will retain a 25% stake in Cerevel, said it was ceasing laboratory work in neuroscience.

The deal looks surprising on the surface. A more typical move for private equity would be one like Bain’s investment in Stada Arzneimittel, an established company with a slow-growing top line whose earnings could be dressed up with cost-cutting and payroll reductions.

Still, the Cerevel transaction is not totally out of character for Bain, which last year joined a venture capital consortium that formed Springworks Therapeutics and took over some of Pfizer’s rare disease assets, also an unusual space for private equity (Pfizer dodges costs and scrutiny by springing loose rare disease assets, September 25, 2017).

And Bain has proven that it can be patient with biopharma deals – it was eight years before its investment in Warner Chilcott led to an exit with the 2013 sale to pre-Allergan Actavis.

Like typical venture capital investors, Bain will probably prefer both Springworks and Cerevel to be taken out with a clean acquisition. This must mean that one scenario sees Pfizer buying back these companies should their pipelines look sufficiently promising – and without having risked its R&D budget on potential therapeutic dead ends.

Bain investments in human therapeutics
Company Transaction Outcome
Warner Chilcott Consortium bought company, 2005 Sold to Actavis, 2013
Stada Arzneimittel Consortium bought controlling share, 2017 Consortium taking full control, 2018
Solid Biosciences Part of series C syndicate IPO, 2018
Replimune Part of series B syndicate, 2017 IPO, 2018
Springworks Therapeutics Bain and venture capital groups founded company and bought Pfizer rare disease assets, 2017 Active
Inflarx Part of series D syndicate, 2017 IPO, 2017
Aptinyx Part of series B syndicate, 2017 IPO, 2018
Cerevel Therapeutics Bain and Pfizer founded company for Pfizer CNS assets, 2018 Active

On the other hand, Bain was part of venture syndicates supporting VC rounds last year that have since successfully floated, so an IPO for Springworks or Cerevel is not out of the realm of possibility.

Parkinson's and epilepsy

Pfizer gave some details of two candidates involved in the transaction, a dopamine D1 receptor partial agonist ready to begin a phase III Parkinson’s disease trial in 2019, and a selective GABA 2/3 agonist that will enter phase II in epilepsy. Neither was identified by a specific research code – Pfizer tested a D1 partial agonist, PF-06669571, in phase I, but it did not meet its pharmacodynamics endpoint. 

PF-06412562, meanwhile, is the subject of an investigator-led trial in Parkinson’s disease at the Milton S. Hershey Medical Center in Pennsylvania, but that work began just last month, so it also looks unlikely to have been picked up by Cerevel.

Pfizer seems reluctant to split into multiple parts, a move that would in theory improve the visibility and valuation of many of its early-stage projects and something some of its investors have been pushing for. As long as Pfizer stays big, spinning off little-noticed assets remains an option, and in Bain it seems to have found a helpmate.

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