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Lilly to buy Loxo Oncology for $8B; Regeneron, Sanofi rejig I-O collaboration

Top news

* Indianapolis-based Eli Lilly and Co. is acquiring Stamford, Conn.-based cancer specialist Loxo Oncology Inc. for about $8 billion, or $235 per share. Indianapolis-based Lilly says the deal, which it expects to close by the first quarter of 2019, is the largest of a series of transactions meant to expand the company's cancer treatment efforts.

* Sanofi and Regeneron Pharmaceuticals Inc. amended their 2015 collaboration to discover and develop immune therapies for cancer. The initial deal between the French pharmaceutical giant and New York's Regeneron was signed in 2015 and was supposed to end in mid-2020.

Under the new agreement, Sanofi will pay Regeneron $462 million — the balance amount under the previous deal — development costs of retained programs and a termination fee for the programs not undertaken by the French company. In return, Sanofi secures the right to opt-in to the development and commercialization of two product candidates — BCMAxCD3 and MUC16xCD3.

* Celgene Corp., which is in the process of being acquired by Bristol-Myers Squibb Co., expects to meet its guidance for full year 2018 based on a preliminary review of its results, the company said in a news release. The biotech previously said it expects 2018 total revenue to hit $15.20 billion, and adjusted EPS to be between $8.75 and $8.80. For full year 2019, Celgene expects adjusted EPS to be in the range of $10.60 to $10.80, an approximate 22% increase year over year. The company also expects 2019 total revenue to be between $17 billion and $17.20 billion, or a 12% rise from the previous year.

* Takeda Pharmaceutical Co. Ltd. CEO Christophe Weber said the company will likely hold on to its over-the-counter drug unit even as it faces pressure to boost finances ahead of the closing of its £46 billion acquisition of Shire PLC, Reuters reported. Tokyo's Takeda had said it expects to close the takeover Jan. 8, after having received shareholder and regulatory approvals.

* Center for Medicaid and CHIP Services Director Mary Mayhew, who has helmed the agency for only three months, is resigning to become head of Florida's health agency, the Orlando Sentinel reported.

SNL Image
FDA headquarters in Silver Spring, Md.
Source: Associated Press

On the policy front

* Three weeks into the U.S. government shutdown, U.S. Food and Drug Administration Commissioner Scott Gottlieb said his agency has about one month's worth of user fees it collects from brand-name biopharmaceutical manufacturers on hand to continue regulatory work on new drug applications during the government shutdown. Gottlieb also said he was staying put at the FDA, despite rumors that he was preparing to depart the agency, which he has run since May 2017.

On Jan. 5, President Donald Trump, whose demand for over $5 billion to fund a wall on the U.S.-Mexico border triggered the partial government shutdown, also criticized drugmakers after the companies increased their prices on hundreds of products. "Drugmakers and companies are not living up to their commitments on pricing. Not being fair to the consumer, or to our country," Trump tweeted.

Meanwhile, Democrats have made lowering drug prices a key plank in their so-called For The People agenda. House Democrats also made defending the Affordable Care Act a key focus in the new Congress, starting off by filing a motion seeking to intervene in a lawsuit brought against the law by Republican state attorneys general and governors from 20 states.

M&A and capital markets

* Bristol-Myers Squibb and Celgene have set a $2.2 billion termination fee for their blockbuster $74 billion deal should either party back out before completion. The companies on Jan. 3 announced the massive deal — the first major pharma M&A activity of 2019 — that will bring the companies together amid increasing competition in the cancer drug markets.

* A report by law firm Baker McKenzie expects global healthcare transactions to rise by 7% to $331 billion in 2019, compared to a drop of 5% to $308 billion in 2018. Deal activity will be mostly focused in the U.S. and Asia as a result of populations with relatively disposable incomes, according to the report.

Drug and product pipeline

* Mersana Therapeutics Inc. said it would halt research on its experimental breast cancer drug XMT-1522, being developed in collaboration with Takeda Pharmaceutical Co. Ltd. following a strategic evaluation. Mersana plans to focus resources on the advancement of another cancer drug, XMT-1536, which is being tested in a dose escalation study among patients with ovarian and non-small cell lung cancer adenocarcinoma.

* Aerie Pharmaceuticals Inc., which plans to seek Japanese approval for its eye drop Rhopressa, said the medicine helped reduce fluid pressure in the eyes of Japanese-American patients with glaucoma in a mid-stage trial. Japan's Pharmaceuticals and Medical Devices Agency had asked the company to evaluate the medicine to treat ocular hypertension — characterized by abnormally high eye pressure — in Japanese and Japanese-American patients with glaucoma.

* Celgene increased the price of the 10-milligram dose of its blockbuster cancer drug Revlimid by 3.5% on the same day it announced that it was being acquired by Bristol-Myers in a massive $74 billion deal, Bloomberg News reported.

Operational activity

* AbbVie Inc. said it will take a $4 billion impairment charge related to its 2016 acquisition of Stemcentrx Inc., which brought experimental cancer treatment Rova-T into the drug giant's pipeline. AbbVie halted patient enrollment in a late-stage study of Rova-T last month after the drug failed to prolong the lives of lung cancer patients compared to chemotherapy.

In March 2018, AbbVie had said it will not seek accelerated approval for Rova-T in the U.S. as a third-line treatment for small-cell lung cancer after a mid-stage clinical trial did not show the desired efficacy in treating the disease.

* U.S District Judge Vince Chhabria limited the evidence that can be presented to support claims that weed killers made by Bayer AG's unit Monsanto Co. cause cancer, The Wall Street Journal reported last Friday. The ruling is good news for the German chemicals and pharmaceutical giant, whose stock has dropped since the company assumed the case after acquiring Monsanto, the world's top seed company, in June.

* Gilead Sciences Inc. and Yuhan Corp. entered into a licensing and collaboration deal to jointly develop drug candidates to treat advanced fibrosis due to nonalcoholic steatohepatitis, a type of liver disease. Under the deal, Gilead will acquire from Yuhan global rights to develop and commercialize novel small molecules against two undisclosed targets worldwide, except South Korea, while Yuhan, a South Korean pharmaceutical company based in Seoul, will retain commercialization rights in the country.

* Esperion Therapeutics Inc. agreed to grant Daiichi Sankyo Europe GmbH the rights to commercialize two of its cholesterol drugs in certain European countries for an up-front payment of $150 million.

* Biogen Inc. is teaming up with C4 Therapeutics Inc. to develop new treatments for neurological conditions, such as Alzheimer's disease and Parkinson's disease, using C4's protein degradation platform. Biogen will pay up to a total of $415 million, including up front and potential future milestone payments plus potential future royalties, to C4 under the deal.

Cambridge, Mass.-based Biogen is also collaborating with Skyhawk Therapeutics Inc. to develop therapies for neurological diseases using Skyhawk's SkySTAR technology platform. Skyhawk received an up-front payment of $74 million from Biogen and may receive potential future milestone payments and royalties.

* U.S. District Judge Theodore Chuang ruled that pharmaceutical giant Bristol-Myers, The Johns Hopkins University and the Rockefeller Foundation must face a $1 billion lawsuit over their involvement in a U.S. government experiment in the 1940s that caused hundreds of Guatemalans to be infected with syphilis, Reuters reported.

Other features

* Bloomberg News has a feature on the disparity between prices of certain drugs in different U.S. states.

* The Wall Street Journal writes about how healthcare startups are leaving behind traditional data storage techniques to facilitate the use of artificial intelligence and about how health devices are tracking even more information than ever. The Journal also has a feature about healthcare startup Blink Health, a company aiming to incorporate e-commerce into drug prescriptions.

* Children's hospitals are more likely to give kids the recommended antibiotics for their pneumonia compared to other hospitals, Reuters reported, citing a U.S. study.

* CNBC has a feature about the apparent disconnect between the amount of investment in digital health and the quality of health of people.

The day ahead

Early morning futures indicators pointed to a lower opening for the U.S. market.

In Asia, the Hang Seng was up 0.82% to 25,835.70. The Nikkei 225 rose 2.44% to 20,038.97.

In Europe as of midday, the FTSE 100 fell 0.63% to 6,794.27, and the Euronext 100 retreated 0.48% to 916.89.

Click here to read about today's financial markets, setting out the factors driving stocks, bonds and currencies around the world ahead of the New York open.

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