Pfizer (PFE) acquired a private biotech by the name of Therachon. The reason for doing so is to add several rare disease drugs into its pipeline. I believe that this is a good strategy. Especially, when you consider that the newly acquired biotech has several other rare disease indications it is working on. I tend to favor more those companies that develop drugs for rare diseases. First, they target an unmet medical need. Secondly, because, most of the times, there aren't too many competitors that exist in a certain space.
A Sharp Acquisition To Boost Pfizer's Pipeline
Pfizer agreed to pay $370 million upfront to acquire Therachon. However, Therachon is even eligible for up to another potential of $470 million in milestone payments. One of the main reasons for acquiring the biotech is to gain access to a drug by the name of TA-46, which is a recombinant human fibroblast growth factor receptor 3 (FGFR3) decoy. This drug is being used to treat a disease known as Achondroplasia, a form of short-limbed dwarfism. Why is using an FGFR3 decoy a good drug to treat this disease? That's because it will help to normalize the FGFR3 signaling that is ongoing. A normal function would only send transient growth inhibition signals. The problem with the disease is that it sends persistent growth inhibition signals. The end result is a lack of cartilage formation, and these people are left with short limbs. The drug, in essence, would normalize the overactive FGFR3 signaling that occurs. The treatment will be given to people as a subcutaneous injection, which is not ideal. However, the good news is that it only needs to be taken once a week. This program is in good shape, because it has already completed a phase 1 study. It has received Orphan Drug Designation from both the FDA and EMA. The most notable part about this treatment is that it is looking to target the underlying cause of the disease. It is a rare disease, because fewer than 200,000 patients per year in the U.S. are diagnosed with it. Therachon also is looking to expand TA-46 towards other skeletal dysplasias.
Spin-Off Company For Another Drug In Therachon's Pipeline
There is another product in the pipeline known as Apraglutide. Apraglutide is a GLP-2 analog in development to treat short-bowel syndrome. This is another important disease to be able to find an effective treatment for as well. That's because patients with this disease receive their nutritional needs through an intravenous drip, because they are not able to eat or drink. The only thing is that, before the closing of the transaction between Pfizer and Therachon, the Apraglutide drug will be spun off into a different company. The good news is that Pfizer's venture capital arm, known as "Pfizer Ventures", will own a stake in the spin-off company, which it will continue to hold.
The use of TA-46 for Achondroplasia is now in Pfizer's hands. The problem is that BioMarin (BMRN) is also developing a drug to treat patients with the very same disease. It is even further along, already working on completing a phase 3 study. Matter of fact, this late-stage study has already been fully enrolled. Clinical results for these patients being treated with BioMarin's vosoritide in children are expected by the end of 2019. That will give an idea on whether or not the study is successful. The downside for Pfizer's newly acquired product TA-46 is that it has only completed a phase 1 study. That means BioMarin has a major advantage in that it is much further along in clinical testing. On the flip side, TA-46 specifically targets the underlying issue associated with the disease. It targets the genetic mutation of the FGFR3 receptor, which is the root cause of Achondroplasia. That means until TA-46 is evaluated in its phase 2 and phase 3 studies, it could be a few years before we know if it can compete with vosoritide. Another competitor would be Ascendis Pharma A/S (ASND). However, Ascendis' treatment, known as TransCon CNP, is expected to initiate a phase 2 study to treat the very same condition in Q3 of 2019.
The acquisition of Therachon by Pfizer is a good one for several reasons. For starters, it adds another product to Pfizer's rare disease portfolio. Secondly, Pfizer has the funds and commercial capability to get the drug out to patients that need such a treatment, especially because TA-46 targets the root molecular cause of Achondroplasia. The first risk involves the program of TA-46 itself. The reason why is because it has yet to clear a phase 2 or phase 3 study. That means there is no guarantee that it will successfully complete either or both studies. The other risk would be the competitors themselves. Both BioMarin and Ascendis Pharma are developing their own treatment for Achondroplasia. That means there is no telling how the market landscape will be if and once TA-46 is ultimately approved. However, Pfizer is taking a chance based on the data it saw from the phase 1 study. It believes that it could advance this product in the clinic. If not, at the end of the day, Pfizer loses $370 million for the upfront payment it made to Therachon. The other $470 million is contingent upon many milestones being achieved. Pfizer ended March 31, 2019, with $11.6 billion in cash. Losing $370 million on this type of a gamble is not going to hurt the company at all.
This article is published by Terry Chrisomalis, who runs the Biotech Analysis Central pharmaceutical service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to, I'm currently offering a two-week free trial period for subscribers to take advantage of. My service offers deep dive analysis of many pharmaceutical companies. The Biotech Analysis Central SA marketplace is $49 per month, but for those who sign up for the yearly plan will be able to take advantage of a 33.50% discount price of $399 per year.
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