Melinta Expands Portfolio, TMC Narrows Focus To LDL Reduction With Anti-Infective Deal
Executive Summary
A transaction bringing newly public Melinta three anti-infective products and a related sales force from The Medicines Co. will enable the latter to downsize and focus on its Phase III PCSK9 inhibitor inclisiran.
Two New York-area specialty firms saw their disparate strategies come together in a single deal announced Nov. 29 as Melinta Therapeutics Inc. agreed to acquire The Medicines Co.’s three-product antibiotic franchise and commercial team for roughly $270m plus earn-outs.
The transaction enables TMC to make good on a strategy announced weeks ago to downsize significantly and focus on Phase III hypercholesterolemia candidate inclisiran. Concurrent with the deal, Deerfield Management announced a financing transaction giving the private equity firm a 10% ownership stake in Melinta. (See box.) The Deerfield arrangement provides working capital to Melinta as well as to TMC, which also gets an equity stake in Melinta via the acquisition agreement. In addition, Melinta arranged a $30m equity financing with existing investors.
Deerfield Goes Into Business With Melinta, TMC
- Concomitant with the anti-infective business transaction between Melinta and The Medicines Co., New York-based Deerfield management is providing debt and equity financing to the companies under a commitment letter. The details:
- Melinta gets up to $240m in financing, including an initial $190m backed by a 10% equity stake in Melinta and debt. The debt will have a six-year term with an interest rate of 11.75%, while the equity is being provided at a 10% discount to the stock’s closing price on the day of the commitment letter.
- Melinta also can access an additional $50m in debt within 24 months of closing, contingent on the company achieving a $75m annualized sales threshold measured on the basis of its most recent six-month business period.
- Deerfield will earn a low single-digit royalty on sales of Vabomere – one of the products being transferred from TMC to Melinta – beginning when the drug exceeds $75m in sales and ending when sales exceed $500m.
- The arrangement also provides access to $100m in debt financing to TMC. Specific terms were not disclosed.
On a same-day investor call, Melinta Chief Commercial Officer John Temperato noted that in six months, his company has transitioned from a privately-held biotech with no marketed products to a publicly-traded firm with four approved products. Melinta went public via a reverse merger in August with troubled Cempra Inc., giving it both a Nasdaq listing and a commercial base for launching its first approved drug, the novel fluoroquinolone antibiotic Baxdela (delafloxacin), approved by the US FDA in June. (Also see "Merger With Cempra Takes Melinta Public, Will Help Launch Baxdela" - Scrip, 9 Aug, 2017.)
Under the deal with TMC, New Haven, Conn.-based Melinta gets recently approved Vabomere – a fixed-dose combination of novel beta-lactamase inhibitor vaborbactam and the carbapenem antibiotic meropenem. The transaction also includes the established antibiotics Orbactiv (oritavancin) and Minocin IV (minocycline). Melinta believes Vabomere, approved to treat complicated urinary tract infections (cUTI) has blockbuster potential.
Orbactiv, an injectable for gram-positive acute bacterial skin and skin structure infection (ABSSSI), and Minocin, a tetracycline derivative approved for gram-negative and gram-positive infections, represent a smaller economic opportunity. Combined, they are generating a $30m sales run rate in 2017, Melinta CEO Dan Wechsler noted.
TMC previously outlined a strategy during its Nov. 9 earnings conference call to divesting the infectious disease unit in order to reduce its headcount by 85% before year’s end. The move will allow the company to focus its resources on a lengthy, expensive Phase III program for inclisiran, an RNA-interference PCSK9 inhibitor that it believes can take a dominant market position in the LDL cholesterol reduction market. (Also see "Medicines Company Gets Aggressive With Inclisiran Phase III Plans" - Scrip, 31 Aug, 2017.) TMC partnered with Alnylam Pharmaceuticals Inc. to develop the RNAi candidate in 2013. [See Deal]
Building Out Melinta’s Commercial Team
New Jersey-based TMC will transfer an experienced commercial team of roughly 85 people to Melinta, giving the latter a commercial force of about 135 people.
Wechsler opened Melinta's investor call by introducing himself as the company's new CEO, bringing 25 years in biopharmaceutical experience to the company, including leading the commercial launch of antibiotic Zyvox (linezolid) at Pharmacia Corp. before that company was acquired by Pfizer Inc.[See Deal]
“With the team we currently have on board at Melinta, plus the team that will be joining us from The Medicines Co. once this deal closes, added to the combined portfolio of assets, we will be well on our way to becoming a durable, focused antibiotic company with the expertise and scale to deliver more medicines to more providers for their patients,” Wechsler said.
Combined, the four drugs represent “significant commercial value” with sales potential of more than $1bn for currently approved indications, the exec said. Beyond those indications, Melinta will have Baxdela in Phase III for community-acquired bacterial pneumonia and it will take over TMC’s effort to get Vabomere approved in Europe, where a filing is under review by the European Medicines Agency. (Also see "Pipeline Watch: Topline Phase III Results For Caplacizumab, Relugolix, Iclaprim" - Scrip, 6 Oct, 2017.)
Wechsler added that Melinta will be a pure-play anti-infective company focused solely on discovering, developing and commercializing novel antibiotics. Now planning a launch of Baxdela for ABSSSI in the first quarter of 2018, the deal will give Melinta a rapidly expanding commercial presence, offer corporate synergies from combining two infectious disease-focused sales forces, and catalyze a multi-channel strategy to market its portfolio in the hospital, emergency room and community health care settings, he explained.
Asked how Melinta will position Baxdela versus Orbactiv, since each is indicated for ABSSSI treatment, Temperato said Baxdela is seen as a treatment for more complex cases. The company believes Baxdela will be differentiated from current therapies due to its flexible dosing (intravenous or oral), full coverage of gram-positive and gram-negative infections, the simplicity of its fixed dose and its tolerability and safety profile, including very limited drug and disease interactions. (Also see "Melinta To Launch First Commercial Drug Baxdela Independently" - Scrip, 22 Jun, 2017.)
“We have Baxdela that we are positioning for these challenging complex patients where the pathogens aren't known or they have a mixed infection,” Temperato said. “So, that's a very clear position for Baxdela. And … we will position Orbactiv for those patients that have a defined gram-positive infection, may have MRSA and that are less complicated.”
Adequate Funding For TMC’s Phase III Program
A pair of market analysts lauded the deal from TMC’s perspective, with both Jefferies Equity Research and Leerink Partners opining in Nov. 29 notes that the transaction should provide the financial boost necessary for TMC to avoid a dilutive financing to fund inclisiran through completion of Phase III.
The company has initiated a 3,500-patient Phase III program for the drug to support US and EU approval, incorporating a 3,000-patient study in atherosclerotic cardiovascular disease (ORION-10 and -11), a 400-patient study in heterozygous familial cholesterolemia (ORION-9) and a 60-patient study in homozygous familial cholesterolemia (ORION-5). TMC also has undertaken what it calls a “highly efficient” 15,000-patient cardiovascular outcomes study.
Jefferies analyst Biren Amin said the deal structure should ensure that TMC will have capital adequate to complete this program, as it gives the company $165m in upfront cash at closing, $55m in equity in Melinta and $25m payments at the one-year and 18-month anniversary of the deal’s closing. TMC also can earn tiered royalties on sales of the three approved products going to Melinta.
“The upfront cash should remove near-term overhang of a dilutive capital raise and with the recently announced restructuring of the company should enable [TMC] to execute on its inclisiran trials through 2019,” Leerink analyst Joseph Schwartz wrote.