Celgene (NASDAQ: CELG) has kicked off J.P. Morgan week—the annual healthcare investment gathering in San Francisco—with a blockbuster deal, acquiring privately held Impact Biomedicines for $1.1 billion upfront in cash. More is in the offing if Impact’s drug fedratinib passes a series of regulatory and sales hurdles.
The deal rewards the determination of San Diego scientist John Hood (pictured), who helped bring fedratinib forward in the previous decade, only to see the FDA halt clinical testing due to safety problems when the drug was in the hands of Sanofi (NYSE: SNY). As Impact CEO, Hood raised more than $100 million to buy fedratinib back from Sanofi in 2016 and continue development.
The total deal value could eventually hit $7 billion, but these kinds of speculative payouts, known as “bio-bucks” in the life sciences industry, rarely come to pass. For example, to maximize the payments to Impact, fedratinib would have to surpass $5 billion in annual net sales, a lofty target. More near term are $1.25 billion in extra payments if fedratinib hits regulatory milestones for the treatment of myelofibrosis, perhaps including approval (the companies didn’t immediately specify).
Myelofibrosis is a form of chronic, or slow-growing, leukemia that forms in the bone marrow and causes scarring (hence the “fibrosis”). It can lead to a rapidly-progressing leukemia or cause a host of other problems.
The Wall Street Journal first reported Sunday that a deal between Celgene and Impact was imminent.
Fedratinib had made it through Phase 3 in the hands of Sanofi when eight cases of Wernicke’s encephalopathy, a type of brain swelling usually associated with a lack of vitamin B, emerged from a 877-patient trial. The FDA halted testing in 2013, including studies in other diseases. Sanofi sold the drug to Impact in 2016, which managed to have the FDA lift the hold.
Hood led fedratinib’s development as director of research of TargeGen until 2008. (Sanofi bought TargeGen in 2010.) Last October, after publishing safety data from one of the Phase 2 trials that the FDA halted in 2013, Hood told Xconomy, “There was one outstanding question on safety, and I believe we’ve addressed that now.”
Another drug in the same chemical class, known as a JAK inhibitor, is already on the market for myelofibrosis: ruxolitinib (Jakafi) from Pfizer (NYSE: PFE). Why would Celgene pay a billion dollars, and perhaps a lot more, for a drug dumped by Sanofi for safety problems?
Evercore ISI analyst Umer Raffat wrote in a research note Sunday that ruxolitinib reduces a major complication of myelofibrosis, an enlarged spleen, in a minority of patients, and roughly half of ruxolitinib patients fail to show long-term spleen reduction. “In simple words, unmet need is very high,” Raffat wrote.
One of the Phase 2 fedratinib studies halted by the FDA had what Raffat called “interesting data” in patients whose myelofibrosis became resistant to ruxolitinib or did not respond.