Our Take: Novartis takes a pass on acquiring Cytokinetics during a week of Big Pharma deals
As expected, several large deals involving big-name drug and medical device manufacturers made the news last week while the annual J.P. Morgan Healthcare conference was taking place in San Francisco. One of the largest anticipated deals, however, fell through as the week progressed.
Cytokinetics, a South San Francisco-based biopharmaceutical firm, had a rollercoaster of a week. According to news reports, the company has been exploring options, including a sale, in recent months and has talked with several potential bidders — most notably Novartis, though Johnson & Johnson (J&J) and AstraZeneca have also been mentioned as possible suitors.
Cytokinetics focuses on developing treatments for neuromuscular and cardiovascular diseases that impair muscle function, such as hypertrophic cardiomyopathy and amyotrophic lateral sclerosis. When the company reported positive Phase III data for its lead candidate, aficamten, in late December, its stock price nearly doubled, reaching $83.44 per share on Dec. 27.
Last Monday, reports emerged that Novartis was closing in on a deal that could have valued Cytokinetics at more than $10 billion. Cytokinetics’ stock price soared to a high of $108.06 per share but fell again on Thursday when news came out that Novartis was no longer interested in acquiring the company.
Novartis’ CEO, Vasant Narasimhan, has said the Swiss drugmaker is looking to acquire assets valued at less than $5 billion.
On Thursday, Seeking Alpha reported that Amgen may be considering acquiring Cytokinetics. The two companies collaborated on developing a different drug candidate in the past, but Amgen pulled out of that agreement in 2020.
- Boston Scientific announced that it had entered into a definitive agreement to acquire Irvine, Calif.-based Axonics for $3.7 billion. Axonics makes neurostimulation devices to treat urinary and bowel dysfunction, competing with Medtronic in that space. Provided customary closing conditions are met, Boston Scientific expects to close the transaction by mid-year.
- J&J entered into a multibillion-dollar agreement as well, signing a definitive agreement to acquire La Jolla, Calif.-based Ambrx Biopharma for approximately $2 billion in cash. The move will give J&J a synthetic biology technology platform for developing next-generation antibody drug conjugates (ADCs).
- Ambrx Biopharma’s pipeline includes ADCs in development as treatments for metastatic castration-resistant prostate cancer, metastatic HER2+ breast cancer, and renal cell carcinoma. J&J anticipates completing the acquisition in the first half of this year if Ambrx shareholders approve the deal and other customary closing conditions are satisfied.
- Merck is also investing in growing its oncology pipeline, announcing a definitive agreement to acquire South San Francisco-based Harpoon Therapeutics and its trispecific T-cell platform for an approximate total equity value of $680 million. Harpoon’s lead candidate is a T-cell engager that targets delta-like ligand 3 in cancers such as small cell lung cancer and neuroendocrine tumors. The Merck-Harpoon transaction is expected to close in the first half of this year, pending approval by Harpoon’s shareholders and the satisfaction of customary closing conditions.
- GSK announced that it had entered into an agreement to acquire Aiolos Bio, a biopharmaceutical company with headquarters in the San Francisco Bay area and London, for $1 billion up front and up to $400 million in milestone payments. Aiolos just went public in late October.
- Aiolos focuses on treatments for respiratory and inflammatory conditions. The company’s lead candidate, a long-acting anti-TSLP monoclonal antibody that is ready to enter Phase II clinical development, has the potential to be a best-in-class treatment for asthma. The acquisition is subject to the usual closing conditions.
Our Take: At a time when even Pfizer is taking steps to cut costs, we expect to see more of the industry’s major players adopt strategies similar to the one Vasant Narasimhan has implemented at Novartis, shoring up their portfolios and pipelines through relatively small acquisitions.
That doesn’t mean we won’t see any mega-mergers in the year ahead, but Pfizer has already dipped into its Comirnaty/Paxlovid-fueled coffers to pay $43 billion for Seagen, and Amgen, Merck, AbbVie, and Roche have all announced and/or completed acquisitions approaching or exceeding $10 billion (in a couple of cases by a lot) in the last six months or so.
Novo Nordisk could be in a position to make a large acquisition thanks to the income Ozempic and Wegovy (semaglutide) are generating — at approximately $31 billion, the Danish drugmaker’s revenue for the 12 months ending Sept. 30, 2023, was up nearly 27% from the prior 12-month period — but Novo seems more intent right now on spending money to increase its manufacturing capacity.
Eli Lilly could see its revenue grow by leaps and bounds in the next few years, now that its GLP-1 agonist, tirzepatide, has been approved for weight loss. For the time being, we expect Lilly also to focus on ramping up manufacturing.
It’s possible that J&J could make a substantial acquisition, although the company is still in the process of realigning itself after completing the Kenvue spinout last year.
With Sanofi contemplating a similar spinoff of its consumer health care business — perhaps by the end of the year — it’s unlikely we’ll see the company attempt any substantial acquisitions until after that has been settled. Sanofi has also said it plans to spend more on R&D in its core areas of immunology and inflammation.
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What else you need to know
Mayo Clinic is partnering with Cerebras Systems, an AI startup based in Sunnyvale, Calif., to develop artificial intelligence models specific to health care, Reuters reported. According to a statement on Cerebras’ website, the models “will work alongside doctors to help with patient diagnosis, treatment planning, and outcome estimation.” The AI models will perform functions such as summarizing lengthy patient records, scanning images for patterns that might not be readily observed by the human eye, and analyzing genome data. Eventually, the Reuters report noted, Mayo Clinic plans to make models created through its generative AI collaboration with Cerebras available on the Mayo Clinic Platform, a data network used by other health systems in the U.S. and abroad.
In separate news, the Coalition for Health AI is forming a new nonprofit venture with backing from Mayo Clinic and Microsoft, STAT reported. The nonprofit will oversee a nationwide network of laboratories at U.S. universities and other institutions — including Mayo Clinic, Duke, and Stanford — in which AI tools designed for health care will be tested. The goal, according to STAT, is to create a system for certifying and registering AI models, and to publish information about how the models perform before they are widely adopted. Additional details about the network of laboratories are provided in an article published by JAMA.
Higher utilization increased UnitedHealthcare’s medical loss ratio for the fourth quarter, and even though senior executives told analysts during an earnings call that UnitedHealth Group’s revenue and profit for the quarter were higher than a year ago, news of the increased medical costs sent the company’s share price down by about 4% on Friday morning. Seniors in UnitedHealthcare’s Medicare Advantage plans scheduled more office visits during the quarter, with many requesting vaccinations against respiratory syncytial virus. Some received additional care during those visits, particularly if they had not recently seen a primary care physician. The insurer’s hospital costs for patients with COVID-19 were also higher, especially in December. UnitedHealth is the first insurer to report earnings each quarter, The Associated Press noted, adding that “many analysts see it as a bellwether for rivals.”
New CEO Tim Wentworth believes Walgreens “can help drive a transition in the marketplace over time to a more value-based [reimbursement] model.” Acknowledging increased pressure to develop new drug pricing models that resemble the “Cost Plus experience,” Wentworth said during an investors call on Jan. 4 that Walgreens would “work with payer or PBM partners on any model that recognizes and reimburses pharmacies for the unmatched value we provide patients, including pharmacy services, as well as those models that can ensure more transparency and predictability in reimbursement.” He noted that Walgreens is prepared and “could convert to a cost-plus model overnight,” but because PBM and health plan selling cycles “are not short,” he said he “would expect to see material potential change within a year or two.” Wentworth also said he does not think owning a PBM is “the best path” for Walgreens.
The FDA authorized Florida’s proposed drug importation program, paving the way for Florida to legally purchase bulk quantities of prescription drugs from wholesalers in Canada. Florida’s Agency for Health Care Administration must comply with a set of obligations before importing any drugs, such as submitting additional drug-specific information to the FDA for review and approval, and ensuring the drugs have been tested for authenticity and compliance with FDA standards. The state agency must also relabel the drugs so they’re consistent with FDA-approved prescribing information and submit quarterly reports to the FDA on cost savings and safety or quality issues. Florida is the first state to receive such an authorization, which is valid for two years from the date the FDA is notified of the first shipment of drugs to be imported.
Amazon is partnering with digital health companies on programs designed to help people manage chronic health conditions. The idea is to make it easier for them to discover their digital health benefits, Amazon said. Amazon customers can go to the Amazon Health webpage and check their insurance coverage to see if they might be eligible for a health condition program. If that step indicates they may be eligible, they are directed to the partner company’s website to complete the enrollment process. Amazon has chosen Omada Health as its first partner in the new offering; Omada has cardiometabolic programs for diabetes prevention, diabetes, and hypertension. “Ultimately, the more people we’re able to reach, the larger impact we can have on the rising prevalence of chronic disease,” Omada Health CEO Sean Duffy said in a press release.
Generative AI In Health Care: Opportunities, Challenges, And Policy. Health Affairs, 1.8.24
The Case of the Disappearing Thank Yous. JAMA Forum, 1.11.24