Deal analysis part three – the undecided

ApexOnco has already looked at the worst and best oncology deals of the past eight years. There has been a slew of recent big transactions that haven’t yet had the chance to succeed or fail.

Given the track record of pharma R&D disappointment is likely for many of these deals – and there are already warning signs for several. But, given how momentous the few successes have been, acquirers will no doubt be hoping to buck the trend and make these transactions pay off.

For this set of stories, ApexOnco looked for oncology deals of over $1bn and rated them, from good to mediocre (or to be decided) to bad, based on a number of criteria including clinical and commercial success, and up-front spend. 

The last factor is an important consideration: for most big acquirers, anything under $1bn can be fairly easily written off. On the flip side, even acquisitions that lead to approved products can be deemed failures if the outlay outweighed the reward.

As such, Pfizer’s $43bn purchase of Seagen will be closely watched. On the surface the deal appears pricey, but Adcetris was on track to become a blockbuster last year, and Padcev looks set to be practice changing in first-line bladder cancer. Pfizer will also get an ADC technology platform, giving it further opportunities to make its money back.

10 notable oncology deals that could go either way

Note: *licensing deal. Source: OncologyPipeline.

Seagen’s acquisition price was no doubt bumped up by the company's position in the hot area of ADCs – a modality accounting for three of the 10 deals above.

AbbVie hasn’t been put off the space by its disastrous 2016 takeover of Stemcentrx, last year spending $10.1bn on ImmunoGen. The big pharma will need to make a success of Elahere, and get some pipeline wins, to justify its outlay.

A smaller ADC deal looked shaky from the get go: J&J’s takeout of Ambrx came after data probably best described as difficult to interpret. And Merck & Co has much to prove after spending $5.5bn not on a company, but on three Daiichi-originated ADCs.

Radiopharmaceuticals

Another hot area for deals has been radiopharmaceuticals, a trend started by Novartis with its 2017 purchase of Advanced Accelerator Applications. Lilly spent $1.4bn on Point last year, but that group’s lead asset, PNT2002, has already disappointed in the Splash trial and, like Novartis’s Pluvicto, is facing questions about its approvability in pre-chemo metastatic castration-resistant prostate cancer.

Still, Point’s price tag was small change for Lilly, which also gained radiopharmaceutical manufacturing capabilities and the next-gen alpha emitter PNT2001. Bristol Myers Squibb’s purchase of RayzeBio looks arguably a riskier bet given its higher $4.1bn price.

Bristol has been on something of a spending spree lately, also shelling out $4.8bn for Mirati and its KRAS G12C inhibitor Krazati, despite questions over the size of the KRAS market following underwhelming sales of that product’s main rival, Amgen’s Lumakras. Bristol this week announced a long-awaited filing for Krazati in colorectal cancer.

The similarly sized Turning Point buy yielded an approval in November for Augtyro, but this product will be contesting a niche, NSCLC with ROS1 fusions. Bristol has said it hopes to double this market, currently worth around $500m, and this will be needed to make the deal pay off.

Elsewhere, AstraZeneca entered the competitive BCMA Car-T space with its purchase of Gracell, while Merck’s takeout of Imago could be disappointing given sales expectations for bomedemstat, the driver of that deal.

This series of analyses has suggested that projects brought in via deals are more likely to fail than to succeed. However, companies that do not make acquisitions are often punished on the stock market, and internal development also comes at a less quantifiable cost. Despite the risks, big pharma’s M&A spending spree looks set to continue.

This is the third of a series of deal analyses.