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Onyx deal signals broader interest in orphan drugs

Authored by Karl Simpson

The opportunities for orphan drug therapies addressing rare diseases has been a dominant feature of the pharmaceutical industry the past 12 months, and the fervour around companies working in the orphan drug category have been receiving incredible interest from investors, both private and public. This has given stimulus to the M&A chatter that persistently permeates the life sciences market, and the deals have also started to flow.

First up we have the one which has boosted the M&A coffers of Wall Street most significantly, Amgen’s acquisition of Onyx Pharmaceuticals. Onyx has two orphan designated products in the cancer therapy market, Kyprolis and Nexavar, which have been touted as assets that have considerable opportunities to grow sales over the next few years, clearly prompting Amgen to part with $10.4bn to buy the San Francisco based Onyx.

Then Chiesi Farmaceutici, the family owned Italian pharma company led by CEO – Ugo di Francesco. His arrival has seen a flurry of deal making to begin building a more considerable Rare Diseases business, with licensing deals with UniQure and Kamada and now they jumped in and purchased Zymenex Holding A/S, a biopharma company in the rare diseases field, purchased from Sunstone Capital. Zymenex develop products addressing LSD (lysosomal storage diseases) and have FDA and EMA orphan designation for Lamazyn™. Chiesi seems intent on building up its R&D and commercial capabilities in the rare diseases field and with capital available it almost certainly hasn’t finished acquiring orphan drug asset

Then there are the two rare disease heavyweights who are persistently enveloped in acquisition rumours, Alexion and Shire. Sources throughout the summer have suggested that Roche, a long term admirer of Alexion, was preparing to mount a bid for the company. The news which was originally dispatched by Bloomberg suggested Roche had approached Alexion over a possible offer, with both sides engaging advisors. However, the rumours for now seemed to have cooled and to-date there have not been any offers for the company.

Then there is Shire, which has been a focus of continual rumours over past years and once again seems to be in the cross-hairs of investor commentators. Flemming Ornskov  took the helm at Shire earlier this summer and has been swift to announce the new strategic structure for the business, bringing more focus towards ‘One Shire’ rather than the previous three operating units; Speciality Pharma, Human Genetic Therapies and Regenerative Medicine. Shire itself has been highly acquisitive in the past and has signalled intent to bring new products to the various product areas which are strategic to its future, including ophthalmology, neurology and human genetic diseases. Dr. Ornskov has scotched rumours of any acquisition and suggested any appointment of financial advisors is consistent with the operations of the company.

There is also the US biotech, Catalyst Pharmaceutical Partners, which announced in late August a boosting regulatory outcome when it achieved ‘Breakthrough Therapy’ status from the FDA for Firdapse for the treatment of symptoms of LEMS. Through the licensing deal that BioMarin did with Catalyst, BioMarin was able to acquire a 17% stake in the company, which many believe it is now looking to convert to an outright purchase of the company. The product CP115, is one of a group of novel GABA-aminotransferase inhibitors and derivatives of vigabatrin (SABRIL®, Lundbeck) discovered by scientists at Northwestern University, and is a very attractive asset with orphan drug designation in both the US and the EU for infantile spasms. It is being looked at in a number of indications such as epilepsy and disorders where modulation of GABA levels might prove beneficial. Yet, BioMarin remain of interest to potential buyers too, with a good pipeline and growth opportunities, they would make a significant purchase for a company with rare disease interests, perhaps even a consolidation merger. However, Jean-Jacques Bienaime who is CEO of BioMarin has dismissed any possibility that the company is likely to be bought. He has done a tremendous job of reversing the company’s fortunes since he was appointed in 2005 and the company is now very strongly positioned.

Rare diseases and orphan drugs is a very strong area of interest for industry and investors alike. While the reports of large margins and highly profitable products is often misrepresented, there are certainly some very compelling opportunities to address the 7000+ estimated rare diseases. This effervescence has seen private and public capital flow into rare disease drug development. It has also led to some impressive investor returns on publicly traded companies such as Sarepta, Aegerion and NPS Pharmaceuticals. With orphan drug companies trading at a market premium and the industry largely in pursuit of interesting assets in this area, we fully expect to see sustained levels of M&A in rare diseases and certainly no shortage of rumours.

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