- Celgene Corp., facing investor jitters over future growth, said Sunday it will acquire San Diego-based Impact Biomedicines and its late-stage blood disease drug fedratinib in a deal worth up to $7 billion.
- The deal is back ended, providing Impact's backers with $1.1 billion upfront and up to another $1.25 billion in potential payments if fedratinib wins regulatory approvals in myelofibrosis. That might not be far off: Celgene anticipates filing the drug for approval in that indication this year.
- Fedratinib, a JAK2 kinase inhibitor also in testing for polycythemia vera, fits well with Celgene's expertise in hematology and should help ease the sting of a clinical setback last year for an important pipeline candidate in Crohn's disease.
Announced on the eve of the J.P. Morgan Healthcare Conference, Celgene's acquisition will give the investors and analysts who pour into San Francisco much to discuss as biotech's annual confab kicks off.
While the total deal size is substantial, most of Celgene's commitment comes in the form of sales milestones if fedratinib secures regulatory approvals. Under deal terms, Celgene would begin handing Impact tiered contingent payments once the drug surpasses global annual sales of $1 billion. If all thresholds are hit, sales milestones are capped at $4.5 billion.
Structuring the deal this way gives Celgene some security for betting on a drug that previously hit a major safety roadblock. Originally licensed to French drugmaker Sanofi SA, fedratinib was placed on clinical hold in 2013 due to reports in eight patients of Wernicke's encephalopathy (WE), a neurological condition caused by vitamin B deficiency.
Impact, formed in 2016, bought the drug from Sanofi and convinced the FDA to lift the clinical hold on the drug in August last year. A post-hoc analysis presented at a medical conference in December found that only one of the eight cases presented a clear case of WE, giving Impact further confidence in the drug's safety.
Even with a deal weighted toward milestone payments, the $1.1 billion upfront looks to be a coup for Impact, which had raised $90 million in financing last October.
For Celgene, buying Impact gives it a drug ready for a mid-year submission to regulators and a potential competitor to Inctye Corp.'s Jakafi (ruxolitinib).
"We believe fedratinib is uniquely positioned as a potential treatment for myelofibrosis and it provides strategic options for us to build leadership in this disease with luspatercept and other pipeline assets," said Nadim Ahmed, head of hematology and oncology for Celgene, in a Jan. 7 statement. Celgene currently lists luspatercept in Phase 2 testing for myelofibrosis.
Buying Impact also signals the company's intention to answer questions raised by a confidence-shaking cut to long-term sales forecasts.
In October, Celgene scaled back its 2020 sales guidance for cancer drugs to between $2.6 and $2.8 billion from a previous estimate of $4 billion, and knocked $1.2 billion to $1.4 billion off forecasts for its immunology and inflammation franchise. Only a substantial boost to guidance for existing hematology indications kept topline revenue targets for 2020 somewhat close to the company's previous mark of $21 billion.
Slow growth from a new drug called Otzela (apremilast), as well as the late-stage failure of the Crohn's disease drug mongersen, figured into the surprising cutbacks.
Pipeline worries are ever-present for biotechs, even for major players like Celgene. But investors have grown increasingly concerned about how Celgene will maintain growth when it loses patent protection on its top-selling blood cancer drug Revlimid (lenalidomide), which accounts for more than 60% of sales. Patent protection runs through 2027 but, starting in 2022, Natco Pharma Ltd. will be allowed to sell copies of the drug through a settlement agreement.
Buying Impact is a major step toward answering some of those concerns, although some might question Celgene's nose for M&A after the $710 million deal to acquire mongersen failed to yield the expected returns.