Clinical success resulted in a short public life for ophthalmology specialist Novagali Pharma. Santen Pharmaceutical is bidding to buy the French group at a 71% premium to lock up its suite of late-stage eye-disease candidates, including the glaucoma drug Catioprost (Novagali glaucoma data could see clearer path to partnering discussions, September 9, 2011).

The move gives the Japanese company a bigger footprint in Europe to complement its US option to co-promote with Merck & Co the glaucoma treatment Saflutan (Tapros), which is due for an FDA decision around year end. For Novagali’s shareholders, they get an exit in the price range proposed when the company went public in July 2010, something its shares never achieved while freely traded.

Strengthened pipeline

With the acquisition, Santen picks up marketed dry-eye product Cationorm, the phase III-ready Catioprost and two late-stage assets in Novagali’s reformulated cyclosporine products Vekacia, for severe dry eye and Cyclokat, for vernal keratoconjunctivitis. The latter product is a prescription version of a cyclosporine mixture now compounded in hospitals to treat the rare and severe paediatric form of conjunctivitis that can cause scarring and vision loss; it has orphan drug designation in both the US and EU.

Reformulation has been essential to Novagali’s business strategy, using its novasorb technology, which relies on electrostatic attraction between medication and eye tissue, to improve solubility and absorption. Taking advantage of that technology, Catioprost is a low-dose, preservative-free reformulation of Xalatan that reduced the signs and symptoms of ocular surface disease in its phase II trials while proving non-inferior in reducing intraocular pressure.

Should those products succeed in the clinic and with the regulators, they would complement Santen’s own arsenal of medications for those conditions: the aforementioned Tapros, Hyalein for dry eye and the quinalone levofloxacin for ocular infections, each of which is forecast to achieve useful sales of more than $100m this year, according to EvaluatePharma data.

With a strengthened pipeline, Santen has reason to hope it can hold its lofty position in the ophthalmological space and perhaps carve chunks out of big pharma competitors Novartis and Roche, which are forecast to lose market share through 2016 as it stands (see table).

Strategic worries

For Novagali, Cationorm has been on the market since 2006 in France and has been slowly expanding into primarily Asian and Middle Eastern countries in addition to Italy. It has been preparing for a launch in the US, having signed a contract with Ardeo Health.

Meanwhile, it had been seeking to license Cyclokat and Catiprost. However, with income from Cationorm at just €369,000 in the first half of 2011 and cash burn rising to €6.6m from €4.1m with the increase in clinical activities around Catioprost and Cyclocat, its cash reserve had dwindled to €11.5m.

Without a licensing deal or a significant jump in Cationorm sales, a fundraising was likely to be necessary in difficult market conditions. Thus a purchase offer became an attractive and sensible option.

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