Is Anemic Growth Sending Novo Nordisk After Global Blood Therapeutics?

Once high-flying Novo Nordisk has been sending out M&A signals as it seeks a solution to weak growth, so analysts aren't surprised to see the Danish diabetes giant stalking US-based Global Blood Therapeutics.

Novo Nordisk AS's long and steady financial run on self-generated diabetes and obesity products is flagging – and the Danish group has acknowledged that it needs to revitalize its other product lines to generate fresh revenue growth – so reports it is interested in California-based Global Blood Therapeutics Inc. have not surprised observers.

Reuters and Bloomberg, quoting unnamed sources, reported the South San Francisco-based sickle cell drug developer has been approached by Novo Nordisk. Neither Global Blood nor Novo Nordisk would comment to Scrip on the reports, but analysts say it makes sense for the Danish group to actively look outside for a bolt on to help it diversify beyond its aging diabetes franchise.

"Novo Nordisk has avoided acquisitions in the past, so this is a change of direction for them."

Diversification Needed

"I'm sure it's a calculated risk; in this case since Novo Nordisk's diabetes business is suffering, so they need to focus elsewhere and this acquisition can help them strengthen their blood offerings. Novo has avoided acquisitions in the past so this is a change of direction for them," commented Steven Muntner of Medtrack.

Rising competition and pricing pressures in the US and elsewhere led Novo Nordisk last October to slash its growth expectations for 2017 and increase R&D efforts announce expansion into new therapy areas and seek external deals for early-stage assets to bulk up its pipeline. (Also see "Novo Nordisk Shakes Up R&D Strategy To Cope With US Pricing Pressures" - Scrip, 28 Oct, 2016.)

Its outlook reduction last autumn sent Novo Nordisk shares south. Berenberg analysts Mar. 6 said, "Novo’s shares have not recovered from the profit warnings issued by the group in 2016. It is clear from guidance that 2017 will be a slow year, and there is a risk of Roche’s new hemophilia drug ACE910 [emicizumab] eroding sales of NovoSeven, and thus acting as a drag on 2018 and 2019 earnings." NovoSeven is Novo Nordisk's aging hemophilia drug whose sales have been sliding; the company doesn't yet have strong commercial response after it decided in September 2012 to discontinue the development of vatreptacog alfa, a fast-acting recombinant Factor VIIa analogue for hemophilia patients with inhibitors which had been in Phase III trials and had been seen until then as a replacement for blockbuster NovoSeven.

Global Blood Bolt-On?

So could Global Blood Therapeutics help the Danish group respond to its current commercial gloom?

The loss-making company was founded in 2012 by Third Rock Ventures [See Deal] and launched an IPO in Aug. 2014. Before media reports of Novo Nordisk's interest in it, Global Blood Therapeutics had a market value of around $1.2bn.

It is developing drugs for blood-based diseases including sickle cell disease (SCD) and idiopathic pulmonary fibrosis. Analysts say acquiring the young company would provide positive additions to Novo Nordisk's portfolio. Of immediate interest is its product candidate known as GBT440, a hemoglobin modifier that binds to hemoglobin molecules. The oral, once-daily therapy for sickle cell disease is in double-blind Phase I/II clinical trialing and will enter a pivotal Phase III study in SCD called HOPE by the end of 2017, according to BioMedTracker. Like hemophilia, SCD is an orphan disease.

Since oxygenated sickle hemoglobin does not polymerize, Global Blood Therapeutics thinks GBT440 blocks polymerization and the resultant sickling of red blood cells. "With the potential to restore normal hemoglobin function and improve oxygen delivery, GBT440 may be capable of modifying the progression of SCD," the company says. GBT440 has both fast track and orphan drug designation from the FDA for treating patients with SCD and orphan status in Europe.

"It’s an interesting approach, changing the affinity of hemoglobin for oxygen, but the data are still somewhat preliminary at this point," BioMedTracker analyst Peter Chang said, adding that the drug did increase hemoglobin appreciably "and could well impact symptoms, though the study was quite small and there is only limited side effect information so far."

Analysts said Novo Nordisk had alerted the investment community last year during its third quarterly earnings update that it was thinking about M&A.

"They were looking to do bolt-on acquisitions, which they said was more realistic than a large acquisition, and get slightly out of their core and add competencies, in addition to their growth in emerging markets for diversification. So it does look like this would fit into their strategy in that sense," Chang said.