Friday, January 20, 2012

Antibiotics, Big Pharma and Deals

There is a good deal of speculation in the trade press that large pharmaceutical companies are looking for deals – especially ex-US.   The pressures that drive them to deals are manifold and include; failed late stage trials, failure of internal R&D to deliver, generic intrusion, rapidly growing markets in emerging economy countries and a large cache of cash in spite of stock buyback programs to keep shareholders happy.

At the same time, these same pressures are conspiring to make antibiotics attractive once again.  Generic intrusion into the statins and anti-depressant markets combined with the failure to deliver new drugs for these indications are decreasing the potential for multi-billion dollar blockbusters in these indications.  While many companies still dream of big breakthroughs for Alzheimer’s disease they remain elusive. So the average NPV of antibiotics is starting to look competitive once again in the context of a hospital portfolio. 

From my view on the ground, though, I must say that I am not impressed with the number of large pharma companies banging on my door or the doors of my clients searching for antibiotic biotech deals. It remains a buyers’ market out there. 

One interesting speculation though revolves around Astellas and Basilea.  Astellas, as reported in a recent blog, recently returned the rights to telavancin to Theravance.  At the same time, they have a deal with Basilea for their antifungal drug, isavuconazole.  Basilea is now trying to re-apply for marketing approval via the EMA at least and the FDA if possible for ceftibiprole, their anti-MRSA cephalosporin that would then compete with ceftaroline from Forest.  Given that these two products probably account for the vast majority of the value of Basilea, an acquisition by Astellas is certainly not out of the question.

Even if this all comes to pass, Astellas would have to outperform Forest considerably given the slow uptake of ceftaroline in the US. Forest’s net sales of ceftaroline (Teflaro) were $6.5 million in the 3rd Q last year. Forest, though, remains very optimistic on the potential for Teflaro given the early patient numbers, the ex-US market is still to come and the fact that the respiratory season had not started until after the 3rd Q.

As always, I await further developments with great interest.  But if the situation for antibiotic biotechs does not improve soon, even this source of new antibiotics will be an endangered species.

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