Allergan PLC on Tuesday said it agreed to acquire Tobira Therapeutics Inc., a biopharmaceutical company that develops therapies for liver diseases, in a deal worth as much as $1.7 billion, or 19 times Tobira’s previous market value.
Tobira focuses on products that treat nonalcoholic steatohepatitis, or NASH, a common liver disease associated with obesity and type-2 diabetes. NASH occurs when the accumulation of liver fat is accompanied by inflammation and cellular damage, and it can lead to scarring of the liver and progress to cirrhosis, liver cancer and eventual liver failure.
“NASH is set to become one of the next epidemic-level chronic diseases we face as a society,” Allergan Chief Executive Brent Saunders said in prepared remarks, citing the increasing rates of diabetes and obesity. NASH has no approved treatments available, the company said, and affects 5% of the U.S. population.
Separately on Tuesday, Allergan said it further bolstered its NASH pipeline by purchasing privately held biopharmaceutical company Akarna Therapeutics Ltd. for $50 million, plus potential milestone payments that weren’t disclosed.
As for the Tobira deal, Allergan will make an upfront payment of $28.35 a share in cash, approximately six times Tobira’s closing price Monday of $4.74 a share. Tobira holders also will each receive one contingent value right to receive as much as $49.84 a share linked to certain development and regulatory milestones.
Shares of Tobira surged 721% to $38.91 in trading Tuesday, while Allergan shares fell 2.7% to $238.67. Tobira now has a market value of about $725 million, up from $89.2 million on Monday.
Drug deals frequently carry high premiums. According to Dealogic, the average premium in biotech and pharmaceutical deals of more than $100 million has been 45% this year and was 37% in 2015.
In recent years, the U.S. pharmaceutical deal with the highest premium—at 256%—was Roche Holding AG ’s $230 million acquisition of U.S.-based Anadys Pharmaceuticals Inc. in October 2011, Dealogic said. That deal boosted the Swiss company’s hepatitis franchise and broadened its business outside its main cancer drug operations.
Tobira’s lead product candidate, cenicriviroc, suffered a setback this summer when the company said the treatment missed its primary endpoint in a midstage trial. The drug did meet one of two secondary endpoints in treating liver scarring associated with NASH, as patients treated for a year saw their scarring improve without a worsening of NASH.
As a result, Tobira said in July that it planned to meet with regulators to discuss the design of a late-stage study, which it expected to begin next year.
In January 2015, cenicriviroc was granted fast-track status by the U.S. Food and Drug Administration, a designation that aims to bring medicines for difficult conditions to market more quickly.
Allergan also will gain another investigational NASH treatment, evogliptin, which is in early-stage studies. Both investigational treatments can make a significant impact in treating NASH, Allergan said.
In the Akarna purchase, Allergan gains Akarna’s investigational treatment for NASH, called AKN-083, which targets a certain hormone receptor in the liver and is in early stage studies. Allergan said AKN-083 is highly complementary to the investigational NASH therapies added in the Tobira deal.
For the first six months of 2016, Tobira reported license and collaboration revenue of $1.2 million and posted a loss of $25.6 million. Allergan, through the first six months, had revenue of $7.08 billion but lost $246 million amid acquisition-related charges, asset sales, write-downs and other items.
Allergan has been an active buyer. Last week, it agreed to acquire clinical-stage biotechnology company Vitae Pharmaceuticals Inc. for $639 million, more than double its market value, in a move aimed at strengthening the drugmaker’s skin-care pipeline.
The company has built up its spending power, in part, through the recent sale of its generics business to Teva Pharmaceutical Industries Ltd. for $40.5 billion.
Jefferies analysts said the high premium that Allergan is paying for Tobira suggested there were multiple bidders for the company, and it points to the industry’s interest in companies developing NASH treatments. Others developing NASH treatments include Intercept Pharmaceuticals Inc., Galmed Pharmaceuticals Ltd. , Conatus Pharmaceuticals Inc. and the French company Genfit SA .
Genfit’s treatment, elafibranor, and Intercept’s therapy, obeticholic acid, are considered among the current leaders in the NASH race. Both are in late-stage trials, and Intercept’s drug in April received the backing of an FDA panel for approval in treating a separate rare liver condition called primary biliary cirrhosis.
Credit Suisse earlier this year predicted that sales of Intercept’s obeticholic acid could reach $159 million in 2018 if it is approved for primary biliary cirrhosis this year, but it eventually could rise to annual sales of $6.5 billion if cleared for NASH.
The four drug companies with NASH products saw sharp gains Tuesday following news of the Tobira deal. Intercept added 8.5% to $170.01; Galmed rose 25% to $4.61; and Conatus gained 19% to $2.09. Genfit increased 16% in Paris trading.
Gilead Sciences Inc. and Bristol-Myers Squibb Co. are among the heavyweights seeking to bring a NASH drug to market. Shares of Gilead rose 3.5% Tuesday, while Bristol-Myers added 0.9%.
Sept. 20, 2016