Actelion Builds PAH Powerhouse with US$420-mil. Acquisition of CoTherix

Swiss biotech Actelion has found an effective means of dealing with increased competition in the niche market for pulmonary arterial hypertension (PAH). It is forking out around US$420 million in cash for U.S. biopharmaceutical company CoTherix, whose product Ventavis (iloprost) is the only currently approved inhaled therapy for PAH in the United States.

Under an agreement approved unanimously by the boards of directors of both companies, Actelion is offering US$13.50 per CoTherix share. This is a premium of 21% over CoTherix’s closing price on 17 November—before the deal was announced—and 72% over the closing price one month before.

The immediate rationale for the deal is the relatively fresh competitive threat posed by Ventavis in the United States to Tracleer, which still accounts for around 97% of Actelion’s product sales. As the first of CoTherix’s products to start bringing in revenues, Ventavis was licensed exclusively for the U.S. market from Germany’s Schering AG, which sells the drug in Europe and Australia. Ventavis entered the U.S. market in March 2005 and ran up net sales of US$18.4 million in the third quarter of 2006—18% more than in the same quarter last year and 13% more than in the second quarter of 2006.

As an inhaled therapy that goes straight to the lungs, Ventavis has a distinct advantage over intravenous treatments for PAH (not Tracleer, which is delivered orally). The downside is that its dosage regimen—six divided doses of 100mcg daily—is relatively inconvenient.

CoTherix is addressing this snag. It plans to start a Phase I clinical trial with a more convenient, dry powder formulation of Ventavis’ active ingredient, iloprost, in the first half of 2007. In March 2006, it launched a Phase III trial (the VISION study) evaluating the safety and efficacy of Ventavis in combination with Pfizer’s erectile dysfunction drug sildenafil (Viagra), which emerged last year as a new oral treatment option for PAH in the United States (and subsequently in Europe this year) under the brand name Revatio (see United States: 07 June 2005: PAH Indication Gives Pfizer's Viagra a New Lease of Life, as Actelion Touts Combination Drug Potential). This study will also examine whether patients on sildenafil can reduce their number of iloprost inhalations from the approved six doses to four doses a day.

Significantly, Actelion greeted the U.S. approval of Revatio by immediately announcing its own plans for a trial evaluating the potential of Tracleer and Revatio as combination therapy. In the first quarter of 2006 it started enrolment for the COMPASS-1 and COMPASS-2 trials; assessing the haemodynamic benefits and the effect on mortality/morbidity of Tracleer given in combination with sildenafil for PAH.

Whatever the present drawbacks of Ventavis, it is clearly performing strongly in the U.S. market. Actelion expects it to contribute more than US$100 million to its product revenues in 2007, and praised CoTherix for having done an “outstanding job” with Ventavis. Moreover, the agreed acquisition is the culmination of what Actelion described as a “long-standing relationship with CoTherix, developed through a shared focus on Pulmonary Arterial Hypertension”.

The relationship was extended through the launch of CoTherix’s Phase II STEP clinical trial, investigating the combination of Tracleer and Ventavis in PAH. Top-line data published in March 2005 showed the addition of Ventavis to Tracleer therapy was well tolerated and provided clinical benefit in PAH patients. As a follow-up to these collaborative efforts, Actelion started discussions with CoTherix on “the strong strategic fit between the two businesses”.

Although these talks were put on hold due to certain unspecified contractual obligations on the part of CoTherix, they must have been well advanced. After fulfilling its obligations earlier than expected, CoTherix approached Actelion about resuming discussions after the close of the Swiss market on Friday 17 November, and by Monday 20 November the acquisition was all but done and dusted. Subject to regulatory clearance and other standard conditions, the acquisition is expected to close early in the first quarter of 2007.

Actelion says that synergies should make the transaction accretive to cash earnings in 2007. In terms of U.S. GAAP (Generally Accepted Accounting Principles) earnings, however, the deal is not expected to be accretive to Actelion’s earnings until 2008, as next year it will face a substantial one-off non-cash charge for in-process research and development.

Outlook and Implications

While the acquisition of CoTherix does not directly address criticisms of Actelion for being too dependent on Tracleer and the PAH market, it does give it considerable leeway to expand and consolidate its position in this market as other, more diverse projects move through the pipeline.

The Swiss company has already made some progress on this front, with trials looking at the use of Tracleer in a number of different patient types. These include patients with PAH linked to HIV or congenital heart disease (currently under regulatory review in a number of territories for inclusion in the Tracleer labelling), in class II PAH patients, in paediatric patients and in other forms of PAH such as chronic thrombo-embolic pulmonary hypertension and pulmonary hypertension secondary to sickle cell disease. In September, the European Union’s Committee for Medicinal Products for Human Use recommended approval for Tracleer as a treatment for PAH associated with congenital systemic-to-pulmonary shunts and Eisenmenger’s physiology (see Europe: 22 September 2006: CHMP Grants Indication Extensions to Actelion s Tracleer, Sanofi-Aventis Taxotere).

CoTherix brings to the table its success with Ventavis in the U.S. market, the possibility of combinations with both Tracleer and Revatio, new delivery systems and more convenient dosage forms, such as the dry-powder formulation of iloprost currently approaching trials. In addition, CoTherix signed an agreement with the Asahi Kasei Pharma Corporation in June giving it exclusive rights in North America and Europe to develop and commercialise oral and inhaled formulations of the Japanese company’s rho-kinase inhibitor fasudil for the treatment of PAH (see Japan: 29 June 2006: CoTherix Licenses PAH Drug from Asahi Kasei Pharma). Efforts to extend Tracleer’s applications to pulmonary fibrosis have produced mixed results, however (see Switzerland: 28 November 2005: Actelion’s Flagship Drug Tracleer Disappoints in the Treatment of Two Forms of Pulmonary Fibrosis and Switzerland: 24 May 2006: Actelion Showcases Study of Tracleer as IPF Treatment).

Looking at the longer term, Actelion’s diversification strategy has not been without hitches. In June, for example, preliminary results of a Phase II study of clazosentan for cerebral vasospasms showed that the drug did not reach its secondary endpoint of reducing morbidity and mortality. A more detailed and favourable post-hoc analysis, though, has convinced Actelion to move clazosentan into Phase III (see Switzerland: 10 October 2006: Actelion Looking to Phase III, Following More Detailed Analysis of Clazosentan Trial Data). The Swiss company has also turned its attention to antibacterials and autoimmune diseases and recently fostered an agreement with compatriot Roche for the co-development and marketing of its selective S1P1 receptor antagonist for multiple autoimmune disorders (see Switzerland: 17 July 2006: Actelion Seeks New Disease Areas for Growth).

Announcing the CoTherix deal, Actelion’s chief executive officer Jean-Paul Clozel was keen to emphasise that the company was anything but a one-trick pony. He said that Actelion “has never been in a better position for substantial future growth from our rapidly-expanding product pipeline, with possibly five different compounds in Phase III in 2007”.