The fever over drugs that unleash the immune system on cancer just got even hotter.
Bristol-Myers Squibb says it will pay a record $1.85 billion to Nektar Therapeutics, a small biotech startup, for rights to its experimental cancer drug, codenamed NKTR-214. Nektar will book 65% of global profits on the drug, should it reach the market, with Bristol getting the other 35%.
That’s a whopping sum, especially for a minority stake in a drug. Philip S. Ross, managing director of biotech investment banking at JP Morgan, said via a spokesperson that the deal is one of, if not the, biggest up-front partnership fees involving a single development stage biotech in biotech history. For comparison, when Johnson & Johnson partnered with Pharmacyclics on Imbruvica, now a $2.6 billion cancer drug on which it receives 50% of sales, it paid just $150 million. JP Morgan has a long-standing relationship with Nektar, and handled their last two fundraises.
The up-front payment will include $1 billion in cash and the purchase of 8.28 million Nektar shares at a price of $102.60, a 35% premium to their closing price yesterday.
What’s Bristol paying for? Aside from the revenue, it will get the exclusive right to combine NKTR-214 with its drugs, Opdivo and Yervoy, for 20 different uses in 9 cancer types (think lung cancer, melanoma, or kidney cancer). Opdivo in particular is expected to be a huge seller. Investment banks forecast the drug could have annual sales approaching $10 billion a year by 2022.
“What you are seeing with this deal is a strong marriage between exceptionally robust science for a company that is a leader in the immune-oncology space,” says Saurabh Saha, Bristol’s head of global translational medicine. “We have established that the T-cell is the warhead for cancer.”
T-cells are a type of white blood cell, and drugs like Opdivo work by removing chemical brakes the body uses to keep them in check. Because tumors exploit these same signals, this allows the T-cells to attack cancer. NKTR-214 is meant to increase the number of T-cells, allowing them to attack cancer harder. Having exclusive access to such a product could help Bristol fend off rivals in the immunotherapy space, particularly Merck, which investors see as having leapfrogged Bristol’s lead place in the immunotherapy field.
This sounds amazing, and early results are promising. Early results combining Opdivo and NKTR-214 were presented in November and showed the drug combination shrinking skin, kidney, and lung tumors in many patients, including some who saw their tumors disappear. But there was no control group of patients randomly assigned to receive Opdivo alone. That makes it hard to be certain that the results were really due to adding NKTR-214.
Fouad Namouni, Bristol’s head of oncology, says the company believes in the combination because the biology makes so much sense. NKTR-214 targets a pathway called IL-2, which should boost T-cell production. He says that the percentage of patients whose tumors shrank is clearly higher than it would be with Opdivo alone. “It’s not just like we picked up whatever agent we happened to have and mixed it up with whatever other agent there happens to be,” says Steve Doberstein, Nektar’s head of research and development. “There really aren’t any other [combinations] that have the same kind of logic behind them.”
The plan is to launch studies testing the combination in 15,000 different patients, far more than Nektar could fund alone. But Nektar’s investors may be disappointed, in part because many probably hoped the company would be bought outright. Bristol’s investors may see the record-high deal price as evidence the company overpaid. (“We’re incredibly pleased with the deal,” says Paul Biondi, Bristol’s well-regarded head of business development.)
It’s hard to find a precedent for a product deal this big. One that comes close was a deal Bristol did back in 2001, when it promised $1 billion in potential milestones (not an up-front payment) and invested another $1 billion in a startup called ImClone Systems. Then the drug was rejected, just as the biotech market was falling apart, eventually leading to a jail term for lifestyle personality Martha Stewart and ImClone’s chief executive, Sam Waksal. ImClone’s drug, Erbitux, did eventually become a blockbuster that helped cancer patients. But in biotech, excitement can as easily come before a fall as before a breakthrough.
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