Merck (MSD), Merck KGaA, BioNTech, Kite

$11.5B acquisitions, we play “Who’s on First”, COVID19 therapy news, cancer Vaccines may be on the way, and CAR T for cancer is here to stay

Originally Published as The Niche Podcast.

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Music by Luke Goodson
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About the Show
Life Science Today is your source for stories, insights, and trends across the life science industry. You can expect highlights about new technologies, pharmaceutical mergers and acquisitions, news about the moves of venture capital and private equity, and how the stock market responds to biotech IPOs. Life Science Today also explores trends around clinical research, including the evolving patterns that determine how drugs and therapies are developed and approved. It’s news, with a dash of perspective, focused on the life science industry.

Transcript

Introduction

Welcome to The Niche Podcast – Your weekly rundown of the biotech, pharma, clinical research, and life science industries. I’m your host, Dr. Noah Goodson. This week, $11.5B acquisitions, we play “Who’s on First”, COVID19 therapy news, cancer Vaccines may be on the way, and CAR T for cancer is here to stay.


Disclaimer

The views expressed on The Niche Podcast are those of the host and guests. They do not necessarily reflect the opinions of any organizations or companies with which they are affiliated.

Merck’s Big Buy

If you missed Merck (MSD outside US) in the news this week, you probably missed the news. They’ve announced the $11.5B acquisition of Acceleron and hit it big with a positive interim report on their anti-viral COVID19 therapy, molnupiravir, driving stocks up. Let’s start at the beginning of the Merck Mega week.

Insider reports suggested Acceleron was up for sale in the $11B range and was courting a mega-partner in late September. Many speculated that Bristol Myers Squibb was the front runner, but this week Merck was announced on top with an $11.5B deal. Acceleron is a commercial stage biotech with a couple of approvals and a pipeline fully focused on the TGF-beta superfamily of secreted proteins. Their approved therapy, REBLOZYL is not where the big money is on this deal – it did about $274M in total revenue in 2020 – and Acceleron only got $55M of that through their royalties. The big price tag is a bet on their late-stage Pulmonary product Sotatercept.

Sotatercept is in late phase clinical studies for the treatment of Pulmonary arterial hypertension, a progressive rare disease that impacts nearly 400,000 globally. The disease impacts multiple organs but the lungs and heart are key. A hallmark of the condition is overactive TGF-Beta driving fibrosis of the lungs ultimately leading to an inability to breath. Sotatercept counteracts this TGF-beta activity, suppressing the progression. Data are promising enough for Merck to buy in to their whole pipeline.

$11.5B may seem like a hefty price for a company in the rare disease space that posted $127M loss in the first have of this year. But some say Merck is not paying enough. A 7% shareholder of Acceleron, Avoro Capital, claims that the price is too low, with a stock price premium of just 38%, compared to an industry average of 89%. I doubt anything will come of this for a range of reasons. First Avoro is a pretty minor stake holder. Second, this is a small rare-disease  market and Acceleron’s pipeline is not dense with a ton of potential candidates, in fact they only have one additional candidate listed. Acceleron is also a far more mature (read older) company and Avoro’s estimate was based on deals that include SPACs which are fairly over-valued right now. Basically, if you compare it to a rising star with new technology and a promising oncology portfolio, yeah it’s a low premium, but if you rank Acceleron as a mature 2nd candidate clinical stage company their pricing is likely healthy. (Disclaimer – I’m not a professional market analysist – I design clinical trials for a living).

It’s important that all of this falls into the context of Merck riding high on Keytruda sales and knowing that rocket will one day run out of fuel. For reference Keytruda sole $4.2B in Q2, nearly 4x Merck’s next closets product. This relatively stable and conservative Pharma giant needs to acquire a range of solutions to perpetuate their long-term value.
 

Another Merck (Merck KGaA)

By the way, the other Merck, Merck KGaA the unrelated company that is not MSD globally, announced the ending of a $4B partnership with GSK to co-develop an oncology product. The immunotherapy bintrafusp alfa was slated to be a hot new therapy for non-small cell lung cancer. GSK initially paid $445M upfront in 2019 to co-develop the asset. Here is where the plot really thickens verbally. Bintrafusp targets TGF-beta (kinda like Acceleron’s Sotatercept also targets TGF-beta), and this breakdown in partnership comes after co-treatment with Keytruda was stopped early in August of this year. So international Merck’s TGF-beta oncology partnership broke down after a failure with US Merck’s Keytruda, in the same week US Merck announces a $11.5B deal to acquire a company with a TGF-beta pipeline to grow their value because they are currently dependent on Keytruda. The news is starting to sound a bit like the old comedy sketch, Who’s on First? Now, despite timing creating a linguistically challenging news week, this is not good news for Merck KGaA or GSK. This partnership has seen significant investment and this ultimate failure leaves a gap for both companies.


Back to Merck (MSD) for COVID19

The real reason Merck’s (MSD’s) shares jumping 8% at the end of the week had nothing to do with a well-considered $11.5B acquisition. In fact, they did not even blip at the news. The potentially major news for Merck was positive interim analysis for their oral anti-viral therapy molnupiravir in the treatment of COVID19. The therapy, developed in partnership with Ridgeback Bio showed a 50% reduction in hospitalization in COVID19 patients and saw 0 deaths compared to placebo in mild to moderate cases. Results were consistent across variants. Merck already has a deal with the United States to sell 1.7M doses for $1.2B. First shipments are expected by the end of the year. This does nothing to slow the spread and does not replace the need for high vaccination rates, but it may be a life changing therapy for many impacted by this disease.


BioNTech Cancer Vaccine

Speaking of COVID19, BioNTech has made their name off their wildly successful vaccine. But their first passion was cancer vaccines. They’ve returned to that target.

To be clear, in this context we do not mean a vaccine that prevents cancer. Rather, the use of vaccine technology to trigger an immune response that allows your body to combat a specific cancer. Remember, a major reasons cancers are a problem in the first place is that they avoid your immune system. mRNA vaccines have been explored for years as a potential solution. This week BioNTech treated a colorectal cancer patient with their major oncology vaccine candidate BNT122 to kick off a Phase II trial. BNT122 is actually designed to specifically target an individual’s cancer. This is precision medicine at its most advanced – tailoring a vaccine to your specific needs so your body can win. Now, we hope for patients everywhere that this is a success.


Kite CAR T-cell FDA Approval

Kite, owned by Gilead, earned their fourth CAR T-Cell approval for Tecartus. This approval is for relapsed or refractory B-cell Acute Lymphoblastic Leukemia (ALL). This is a high unmet need area, but the cell therapy was able to drive 65% complete remission – a pretty striking number in the oncology world. ALL only makes up about 1000 patients annually, so don’t expect Gilead shares to skyrocket on the news. However, this does represent a solid addition for the growing portfolio of CAR T-cell therapies.

Personalized medicines like CAR T and oncology vaccines are attempting to develop toward an economy of scale. Eventually, precision medicine, while not cheap, may be more generally affordable. For now, the processes are so complex and fraught that costs are enormous with Tecartus costing $373,000 Personalized mRNA vaccines for oncology, if they ever make it to market, are likely to start at a similar price point.


Closing Credits

Thanks for joining me on The Niche Podcast; your weekly summary of top news in the biotech, pharma clinical research, and life science industries. You can learn more at thenichepod.com or find us on your favorite podcast app. Like, comment, subscribe, and most of all share with your friends. If you like what you hear, please rate and review, it really helps us. Once again, I’m Dr. Noah Goodson, I’ll see you next week.