AMAG buying once-bankrupt Lumara for up to $1bn
This article was originally published in Scrip
AMAG Pharmaceuticals has been on the lookout for assets to add to its bag of marketed products for the past few years and now the company will pay up to $1bn to buy Lumara Health, formerly KV Pharmaceutical, which emerged from bankruptcy a year ago.
Waltham, Massachusetts-based AMAG is paying $675m up front – $600m in cash and 3.2m AMAG shares – plus up to $350m in fees contingent on sales milestones for Lumara's biggest product Makena (hydroxyprogesterone caproate injection) for the prevention of pre-term labor. Separately, Perrigo will pay $82m to acquire certain topical women's health products in Lumara's portfolio.
Makena has struggled since KV won US FDA approval for the drug in 2011, but sales totaled $130m in the 12 months ending 31 August, representing a 72% increase from the prior 12-month period. AMAG is optimistic about Makena's prospects, predicting 2014 net sales of $180m based on the drug's sales pace during the three months ending 31 August.
AMAG attributed Makena's recent sales gains to positive market dynamics and a favorable regulatory environment, such as the FDA's closer scrutiny of compounding pharmacies, as well as Lumara's new patient-centered business strategy.
KV was forced to reorganize its operations in 2012 under Chapter 11 bankruptcy protection after Makena flopped in the commercial market due to competition from much cheaper versions of the drug from compounding pharmacies (scripintelligence.com, 7 August 2012).
Makena, Feraheme potential
Now, Lumara's Makena sales seem right in line with AMAG's priorities for acquired assets: approved drugs with a small- to medium-sized markets that are administered by doctors in their offices or in hospital settings, like AMAG's own Feraheme (ferumoxytol; Rienso in the EU), which generated $39.6m in sales during the first half of 2014 (scripintelligence.com, 16 July 2012). The company forecast $80m to $87m in Feraheme revenue for the full year based on first half sales.
Of course, AMAG has had its own struggles with Feraheme, an intravenous iron therapy approved in the US to treat iron deficiency anemia (IDA) in adult chronic kidney disease (CKD) patients.
The company's attempt to expand Feraheme's US label beyond CKD patients to all adults with IDA who failed or can't tolerate oral iron treatment was a bust in January (scripintelligence.com, 23 January 2014). The FDA rejected AMAG's supplemental new drug application (sNDA), but the company is in discussions with the agency regarding a safety study to support AMAG's response to the FDA's complete response letter.
"We believe the Lumara Health transaction will facilitate future product acquisitions in an attractive new therapeutic area and is an excellent strategic fit with our Feraheme market expansion plans," AMAG president and CEO William Heiden said in a 29 September announcement.
The company's stock closed up 28.2% at $29.72 per share, bringing AMAG's market cap to $652.6m, based on the Lumara transaction news. The stock and valuation boost seems fitting since Makena's projected 2014 sales are more than double the forecast for Feraheme.
Mr Heiden noted that Makena will be "a tremendous addition to our portfolio and will be complementary to AMAG's in-office injectables commercial expertise."
The company will take on Lumara's sales force to market Makena to doctors who specialize in women's health – an important area for AMAG, assuming eventual FDA approval of Feraheme's label expansion, since women represent one of the largest pools of IDA patients.
"Although orphan drug exclusivity [for Makena] will expire in 2018, there may be logistical barriers to entry and AMAG will continue working on life cycle management/product line extensions which can extend the franchise further," Leerink Swann analyst Joseph Schwartz wrote in a 29 September research note.
Mr Schwartz said AMAG's forecast for combined Feraheme and Makena sales of $350m in 2015, as well as annual cost savings of $20m once Lumara is integrated into AMAG, are achievable and possibly beatable figures based on Leerink's projections.
AMAG had $386.5m in cash and short-term investments as of 30 June and the company now expects to have $100m in cash after the Lumara acquisition closes. AMAG will finance the first $675m of the transaction with cash on hand, $75m in stock and $340m in new debt arranged by Jefferies Finance.
The final $350m in milestone fees will be paid to Lumara shareholders when annual Makena sales reach $300m, $400m and $500m in consecutive 12-month periods.
Perrigo transaction
Perrigo's all-cash transaction will give the Irish company Clindesse (clindamycin phosphate vaginal cream 2%), Gynazole-1 (butoconazole nitrate vaginal cream USP 2%), and Evamist (estradiol transdermal spray) – two of which Perrigo already manufactures for Lumara.
The treatments generated $15m in sales for the 12 months ended 31 March, but the assets previously garnered $78m in peak annual sales before two products were removed from the market due to production issues. Perrigo intends to reclaim lost sales for the products, which have a high barrier to market entry for competitors, the company said.
Perrigo chairman, president and CEO Joseph Papa expects Lumara's women's health products to "strengthen our leadership position within the niche Rx extended topical space."
The acquisition should be "mostly accretive" to earnings in fiscal year 2015.