- Battling to win an advantage in immuno-oncology, Bristol-Myers Squibb Co. will pay an eye-opening $1.85 billion in upfront cash and equity to secure partial rights to an experimental early-stage drug developed by San Francisco-based start-up Nektar Therapeutics.
- Together, the companies plan to test Nektar's drug, dubbed NKTR-214, in combination with Bristol-Myers checkpoint inhibitors Opdivo and Yervoy across 9 different cancer types, including melanoma, lung cancer and kidney cancer.
- In addition to the upfront commitment, Bristol-Myers has lined up another $1.78 billion in milestone payments, putting the total potential deal value north of $3.6 billion — a hefty sum that reflects how important combination therapy has become in immuno-oncology.
Bristol-Myers owns the only U.S. approved-combination immunotherapy regimen in cancer, finding clinical and commercial success with the pairing of Opdivo (nivolumab) and Yervoy (ipilimumab) in advanced melanoma.
Yet trial setbacks have found the pharma playing catch up to rival Merck & Co. in other cancer types, most notably non-small cell lung cancer. Meanwhile, advances from Roche AG and AstraZeneca plc have flooded the market with checkpoint inhibitors targeting the same PD-1/L1 pathway.
In response to the competition — and hunting for even higher clinical efficacy — the field has pushed aggressively into exploring new combinations pairing checkpoint inhibitors with other immunotherapies, chemotherapy and targeted agents.
Bristol's deal with Nektar reflects this trend and the significant upfront fee hints at how necessary finding an edge in combinations has become for the New York pharma.
Per the collaboration agreement, Bristol-Myers will hold rights to 35% of any future global profits from NKTR-214, while Nektar will book revenue from the drug and receive the remaining 65%.
"[Bristol-Myers] was able to get 35% economics, and yet not bet $16 [billion] upfront," wrote Evercore ISI analyst Umer Raffat in a Feb. 14 note to investors. "In addition, it enables [Bristol-Myers] to remain the company with most IO-IO combinations in [Phase] 3."
Even so, investors may question the price paid by Bristol-Myers to gain a minority stake in a drug which, while promising, remains in early testing.
From Nektar's perspective, the deal looks like a clear win. In addition to retaining 65% of any future profits from NKTR-214, Nektar will only be responsible for about a third of development costs to work advancing combos with Opdivo. For any development involving bother Opdivo and Yervoy, Nektar will foot less than a fourth of the bill.
Nektar also retains the freedom to develop NKTR-214 with other third-party assets, as long as the mechanism of action doesn't overlap with Bristol-Myers' drugs. On a call with investors after the deal's announcement, Nektar CEO Howard Robin suggested CAR-T cell therapy could be a fruitful area of study.
Included in the deal's $1.85 billion upfront is $850 million in equity investment by Bristol-Myers in Nektar. Bristol-Myers will pay $102.60 per share — a roughly 36% premium to Nektar's closing price on Tuesday.
Bristol-Myers' willingness to pay as much as it did likely ties to the way in which NKTR-214 works, and how that could complement Opdivo and Yervoy.
NKTR-214 is what's known as an immmune-stimulatory agent, designed to expand the number of T cells and natural killer cells in the tumor micro-environment.
In theory, this would pair well with a checkpoint inhibitor, which blocks the mechanism used by cancer cells to cloak themselves from the body's immune cells. Boosting the number of those cells while simultaneously unsticking the brake on their ability to target cancerous cells could help improve responses.
Data released in November from a study known as PIVOT-02 showed adding NKTR-214 to Opdivo led to encouraging overall response rates in melanoma, lung and kidney cancers. The pairing also seemed to have a some effect in PD-L1 negative patients, a group thought to see less of a benefit from drugs like Opdivo.
Notably, there were few Grade 3 or higher adverse effects across the 38 patients treated with the two drugs — a key concern when layering multiple therapies on top of each other.
Nektar expects to report updated results from that study to report at this year's meeting of the American Society of Clinical Oncology.
In the meantime, Bristol-Myers and Nektar are planning to kick off pivotal studies of NKTR-214 and Opdivo in renal cell carcinoma and melanoma by mid-year. The companies expect the collaboration deal to close by the second quarter.
Shares in Nektar fell by nearly 4% in early Wednesday morning trading, perhaps reflecting some market disappointment that Bristol-Myers didn't buy the smaller biotech outright.