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  • Jonathan Poyer

M&A Picking Up: Bristol Myers and Eli Lilly on the Offensive

M&A is clearly picking up to start the fourth quarter with a billion dollar plus deal each of the first two weeks.

Bristol Myers (BMY) announced the acquisition of Mirati Therapeutics (MRTX) for $4.9 billion cash upfront plus a contingent value right (CVR) for an additional $1 billion (upon acceptance by FDA of a new drug application for MRTX1719, a potential first-in-class MTA-cooperative PRMT5 in locally advanced or metastatic non-small cell lung cancer (NSCLC)). The deal was a 47% premium over the average of last 30-day trading price of MRTX, but a ~4% discount to the last closing price as takeout rumors rallied shares and a ~75% discount to the 2020 peak. Valuation was in line with recent oncology deals at ~5x 5 year forward revenue estimates for lead drug Krazati, available under accelerated approval for KRAS G12C-mutated NSCLC. MRTX has ~$1 billion in cash, but was facing a long road along with some uncertainty to expand use to earlier lines of therapy and additional indications.

Curiously, the deal announcement came right after an FDA advisory committee voted 10-2 that the confirmatory trial for competitor Amgen 's (AMGN) KRAS G12C-mutated NSCLC Lumakras could not reliably be interpreted. It remains to be seen if this will impact the accelerated approval status of Lumakras, but withdrawal from the market is a possibility in cases where confirmatory data is negative.

Case in point, last week Takeda (4502.JP) voluntarily withdraw EXKIVITY (mobocertinib) in US and other markets for exon 20 EGFR mutant NSCLC after the EXCLAIM-2 confirmatory trial missed the primary endpoint. Takeda obtained the drug as part of the $5.2 billion acquisition of Ariad Pharmaceuticals (ARIA) in 2017.

Eli Lilly (LLY) continued the trend of doing a deal right before pivotal data with the $1.4 billion purchase of Point Biopharma (PNT). The deal was an 87% premium to the prior close, but PNT has ~$400 million in cash so the net price is closer to $1 billion. Valuation was estimated to be ~3x peak partner revenue of lead radiopharmaceutical PNT 2002 (net of share owed to partner Lantheus Holdings (LNTH)) plus a manufacturing site in Indianapolis. Curiously, the announcement came ahead of PNT2002's Phase III SPLASH and key competitor Novartis' (NVS) Phase III Pluvicto datasets in Q4 for pre-chemo prostate cancer. The deal price, timing, $55 million termination fee and carve out of the SPLASH trial in the merger agreement suggests modest expectations for the data.

Fire sale M&A also continued with Kyowa Kirin's (4151 JT) purchase of Orchard Therapeutics (ORTX) for $16.00/ADS for $387 million in cash plus an additional $1 CVR representing a 144% premium to the 30-day VWAP.

Regulatory headwinds resurfaced with FDA's issuance of a CRL to Alnylam's (ALNY) sNDA for Patisiran for the treatment of the cardiomyopathy of ATTR amyloidosis. FDA cited insufficient evidence of clinical meaningfulness despite a recent positive vote from an advisory committee.

Creative destruction continued with uniQure (QURE) announcing a 28% reduction in force, total cost savings of $180 million, extension of the cash runway into runway into mid 2027 and discontinuation of over half of ongoing projects.

Likewise, Kezar (KZR) announced it will reduce its workforce by 41% and pause all preclinical research and drug discovery activities to expend the cash runway for the lead clinical programs. Even Apple (AAPL) CEO Tim Cook seemed to be saving for a rainy day with a $41 million personal equity sale.

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