With biotech indices in the doldrums some assets are affordable again. Step forward Ra Pharmaceuticals, a group whose stock had come off 30% in the past 10 weeks, making it a perfect target for the acquisition-hungry UCB of Belgium.
The rationale for the deal is zilucoplan, Ra’s sole asset of note, which UCB hopes will boost its presence in complement-mediated diseases, most importantly myasthenia gravis. And more broadly, fuelled by optimism over the takeout’s 110% premium, many investors will look to the move as a sign that the biotech market’s pitiful performance is bottoming out.
Surprisingly, however, UCB already has a project that targets complement-mediated diseases, and does so in a way that differs from many competitors: rozanolixizumab is an inhibitor of the neonatal FcRn receptor, which is thought to control the recycling of IgG and thus reduce the activation of complement that is thought to cause autoimmune diseases like myasthenia gravis.
Ra’s zilucoplan, meanwhile, works by binding complement C5, and inhibiting its cleavage into C5a and C5b. This strategy is being pursued by several companies, including Apellis, Roche and Regeneron, which are trying to challenge the leading C5 inhibitor, Alexion’s Soliris (Ra joins the challenge to Alexion’s Soliris stranglehold, December 12, 2018).
Thus UCB’s acquisition can be read in one of two ways. Either the group is concerned that the FcRn approach is not all it was cracked up to be, and needs something better to maintain its challenge, or it wants to give itself multiple shots on goal. On a call today the Belgian group insisted that the deal was complementary, and cited the possibility of a combinatorial approach.
Certainly, the monopoly of the mighty Alexion will prove hard to overcome. Soliris is notorious for being one of the world’s most expensive drugs, and Ra had indicated that competing on price was one possibility; UCB says it aims to price zilucoplan “in a very competitive way”.
But Alexion has no fewer than four fingers in the complement-mediated disease pie: Soliris, the Soliris follow-on Ultomiris, and two FcRn projects: ALXN1830, acquired through the takeover of Syntimmune, and ABY-039, a subcutaneous asset licensed earlier this year from Affibody.
While myasthenia gravis is UCB’s initial focus the group played up zilucoplan’s potential in other diseases, including amyotrophic lateral sclerosis. Last month the project became one of 30 selected for an academia-sponsored study called Healy ALS, based on the theory that complement-related proteins are implicated in this CNS disease.
|Selected players in complement-mediated diseases|
|Soliris||Alexion||Anti-complement factor C5 MAb||IV||Sold for PNH, HUS & MG|
|Ultomiris||Alexion||Anti-complement factor C5 MAb||IV, working on SC||Sold for PNH, filed for HUS, ph3 MG|
|Rozanolixizumab||UCB||Anti-FcRn MAb||IV & SC||Ph3 MG|
|Zilucoplan||UCB (ex Ra)||Complement factor C5 inhibitor||SC||Ph 3 MG; ph2 PNH|
|Efgartigimod||Argenx||Anti-FcRn Ab fragment||IV, working on SC||Ph3 MG|
|APL-2||Apellis||Complement factor C3 inhibitor||SC||Ph3 PHN|
|RG6107/SKY059||Roche||Anti-complement factor C5 MAb||SC||Ph2 PNH|
|Pozelimab||Regeneron||Anti-complement factor C5 MAb||IV & SC||Ph2 PNH|
|ACH-4471||Achillion||Anti-complement factor D||Oral||Ph2 PNH|
|M281||Momenta||Anti-FcRn MAb||IV, SC planned||Ph2 MG|
|IMVT-1401||Roivant||Anti-FcRn MAb||SC||Ph2 MG|
|Synt001/ALXN1830||Alexion (ex Syntimmune)||Anti-FcRn MAb||IV, SC planned||Ph2 MG|
|ABY-039||Alexion/Affibody||Anti-FcRn bivalent Ab mimetic||SC||Ph1|
|Source: EvaluatePharma. PNH=paroxysmal nocturnal hemoglobinuria; HUS=haemolytic uremic syndrome; MG=myasthenia gravis.|
Apart from the competition in the market, another concern is anticompetitive authorities – particularly at a time when Bristol-Myers Squibb’s takeover of Celgene and Roche’s purchase of Spark have been delayed by an unusually strict stance by the US FTC.
Indeed, it is worth considering whether UCB/Ra’s putative position in complement-mediated diseases might also be construed as anticompetitive. Perhaps Alexion’s position dispels such fears, however, and UCB today said it was confident that the Ra deal did not raise anticompetitive concerns, without elaborating further.
The all-cash transaction will see UCB pay $48 for each Ra share – the stock had previously maxed out at $36 in July – amounting to $2.5bn in total, or $2.1bn net of Ra’s cash balance.
The proof of UCB’s wisdom will be seen in early 2021, when zilucoplan’s pivotal myasthenia gravis study, Raise, reads out; a phase III trial of rozanolixizumab should yield data at roughly the same time, and the two projects are expected to generate 2024 sales of $406m and $136m respectively, according to EvaluatePharma’s sellside consensus.
Stifel analysts today opined that the UCB/Ra deal was exactly what small/mid-cap cap biotech needed right now. It is probably too soon to gauge the move’s effect on the overall space, but this morning Apellis and Momenta crept up 4% and 1%.