Sanofi Builds Blood Disorder Specialty With Bioverativ Buy
Executive Summary
The French drug maker is making a big splash into blood disorders with the $11.6bn acquisition of hemophilia specialist Bioverativ. Eloctate and Alprolix are young and growing brands, but the competition in hemophilia is fierce, which means Bioverativ's pipeline will also need to deliver to justify the premium price.
Sanofi is making a big bet on blood disorders with the $11.6bn acquisition of Bioverativ Inc. The acquisition, announced Jan. 22, will position Sanofi as a leader in hemophilia, but the competition in the category is fierce and the prospect of gene therapy sits just on the horizon, raising questions about the steep premium Sanofi has paid.
In addition to two marketed drugs that are on track to generate more than $1bn in combined revenues in 2017, Eloctate (recombinant Factor VIII) for hemophilia A and Alprolix (recombinant Factor IX) for hemophilia B, Sanofi will gain a pipeline that includes a Phase III drug for the rare blood disease cold agglutinin disease (CAgD), a gene-edited cell therapy for beta-thalassemia that's ready for the clinic and a preclinical gene therapy for hemophilia. (Also see "Bioverativ: More Than Just A Hemophilia Company" - Scrip, 22 Jan, 2018.)
The acquisition of Bioverativ is a strategic fit with Sanofi's own late-stage pipeline asset fitusiran, a Phase III RNAi compound in development for hemophilia A and B.
Much may be made about whether the deal represents a commitment to gene therapy on the part of Sanofi or, by bringing in the two marketed factor inhibitors, the opposite. In reality, it's probably just a bet that factor inhibitors like Eloctate and Alprolix will continue to dominate the market for the next several years.
For Sanofi, the deal adds some meat to the portfolio's bones in one of the company's core areas, rare diseases, where it leads with its Sanofi Genzyme unit. Investors have been anxious to see the French pharma move on the business development front to reduce its dependence on the challenging diabetes market, and particularly on the blockbuster Lantus (insulin glargine).
The company missed out on two high-profile M&A attempts. It lost out on a bid to buy the cancer specialist Medivation Inc. in 2016 to Pfizer Inc.'s $14bn offer and it also lost Actelion Pharmaceuticals Ltd. to Johnson & Johnson, which bought the Swiss biotech in a $30bn deal. (Also see "Pressed Sanofi CEO Hopes For Positive Dupixent Launch, Praluent Ruling" - Scrip, 8 Feb, 2017.)
With Bioverativ, Sanofi finally sealed the deal, agreeing to pay $105 per share in cash, a 64% premium over the company's closing price on Jan. 19. Bioverativ was only spun out of Biogen Inc. a year ago, on Feb. 1, 2017. (Also see "Bioverativ Hits The Street Ready To Expand In Blood Disorders" - Scrip, 26 Jan, 2017.) The company was tasked with growing the two marketed products and building out a hematology pipeline. Alprolix and Eloctate have been growing; Bioverativ generated $839.8m in the first nine months of 2017. However, Bioverativ only owns the rights to the products in North America and other select markets, while Swedish Orphan Biovitrum AB owns commercial rights in Europe, Russia and most Middle Eastern countries.
"Bioverativ is a pure play in the large and growing hemophilia market and brings an immediate leadership position for Sanofi," CEO Olivier Brandicourt said in a same-day conference call announcing the acquisition. "Second, it brings opportunities to leverage growth of a new platform including Bioverativ's pipeline of rare blood disorder assets and our novel hemophilia agent fitusiran."
A Fit For Fitusiran
The acquisition of Bioverativ is a strategic fit with Sanofi's own late-stage pipeline asset fitusiran, a Phase III RNAi compound discovered by partner Alnylam Pharmaceuticals Inc. in development for hemophilia A and B. FDA recently lifted a clinical hold on the drug after deaths were reported, allowing Sanofi to proceed with the Phase III programs studying the treatment in hemophilia patients with or without inhibitors.
The two partners restructured the deal just ahead of the annual J.P Morgan Healthcare conference in San Francisco, with Alnylam regaining full rights to patisiran and the follow-on ALN-TTRsc02 for transthyretin amyloidosis, while Sanofi got the global rights to fitusiran. Brandicourt said the new agreement "will simplify operations and enable both companies and parties to maximize the value of the alliance." (Also see "Deal Watch: As J.P. Morgan Waits For New Deals, Sanofi Takes Care Of Old Business" - Scrip, 9 Jan, 2018.)
"There is some strategic logic to the deal," analysts at Berenberg said, noting Bioverativ would give Sanofi a significant footprint in the hemophilia market. Berenberg forecasts Alprolix and Eloctate will generate sales of $1.4bn this year. Nonetheless, reaction from analysts was largely lukewarm.
Leerink analyst Seamus Fernandez was more positive, calling the bolt-on deal "a strategically sound move," in a same-day research note.
"The biggest challenge for Sanofi management will be convincing investors that – much like Shire PLC's acquisition of Baxalta Inc. – the current hemophilia market will not be disrupted by new technologies (gene therapies) and product launches."
One of the near-term threats to Bioverativ's commercial products is Roche’s Hemlibra (emicizumab-kxwh), which was recently approved by FDA for use in hemophilia A patients with inhibitors. The inhibitor market does not make up a big part of Bioverativ's business at the moment, but Hemlibra could also be approved soon for the non-inhibitor population after the company reported impressive Phase III data, including superiority data versus prophylactic or on-demand Factor VIII clotting factors. (Also see "Non-Inhibitor Data Secure Roche's Competitive Position In Hemophilia A" - Scrip, 20 Nov, 2017.) Eloctate is designed to be administered every four days, versus every seven days for Hemlibra.
Brandicourt asserted on the conference call that Sanofi carried out an extensive assessment of the market before making the move.
"Despite potential future approvals, we're convinced that factor replacement therapy will remain the standard of care for many years due to excellent safety and its increasing superior standard half-life profile, and that Eloctate will retain the leading position in this category given its superior features," Brandicourt said.
Potentially curative gene therapy is another threat. Bioverativ is developing its own gene therapy for hemophilia, but the product is only in preclinical development, roughly 18 months to two years from entering the clinic, Bioverativ CEO John Cox said in an interview at J.P. Morgan. The timeline puts it well behind rivals like BioMarin Pharmaceutical Inc. and Spark Therapeutics Inc., which have already reported clinical trial data on their gene therapies. (Also see "Spark Plots Rebound For Hemophilia A Gene Therapy, As Rival BioMarin Surges" - Scrip, 12 Dec, 2017.)
Bernstein analyst Tim Anderson said the conference call didn't deliver any comfort that Sanofi really knows the hemophilia market well. "The majority of the feedback we have received from investors thus far is skewed towards the negative, given the shifting landscape in hemophilia … that could shift even further over the next few years due to advances made by competitors in gene therapy," he said.
Indeed, the franchise is one that is eventually expected to wane, with the big question being when. That can be a challenging sell to investors, but Brandicourt pointed to hemophilia as the largest rare disease market, worth $10bn at the moment and growing 10% per year. He expects Alprolix and Eloctate to keep flourishing, and expanding into China, Korea, Taiwan, Colombia, Brazil and Argentina, with the next-generation product fitusiran adding to that growth.
In addition, Bioverativ has been building out a pipeline of assets in other rare blood disorders, already focused on diversifying outside of hemophilia. The company has a late-stage asset BIVV009 for CAgD, a rare disease that can result in chronic anemia and a lifetime of blood infusions, that it acquired with True North Therapeutics Inc. for $400m upfront plus $425m in future milestone payments in May 2017. (Also see "Bioverativ Fills Gap In Pipeline With $400m True North Buy" - Scrip, 23 May, 2017.) Bioverativ is also studying new technologies like gene editing and had its eye on more business development.
The acquisition represents an opportunity for Sanofi to build out a new blood disorder specialty within rare diseases. If it can do so successfully, the acquisition could very well pay off.