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AbbVie And Allergan Merger, And Other News: The Good, Bad And Ugly Of Biopharma

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About: AbbVie Inc. (ABBV), AGN
by: Avisol Capital Partners
Avisol Capital Partners
Long/short equity, newsletter provider, healthcare, biotech
Summary

AbbVie gets conditional approval for Allergan merger in Europe.

Akari reports positive nomacopan data.

Cryoport slumps on Q4 results.

AbbVie (ABBV) reported that it has received conditional approval in Europe for its proposed merger with Allergan (NYSE:AGN). The $63 billion merger has been closely watched by international regulatory authorities. It is likely that after Europe, the US may also give the green signal to the merger soon. However, the European approval has come with certain caveats.

The European Commission focused on investigating biologic treatments for ulcerative colitis and Crohn's disease. This is the area where there is overlap between AbbVie and Allergan. These diseases are collectively known as inflammatory bowel diseases or IBD and are a type of lifelong autoimmune ailments. AbbVie has several treatments for IBD, the prominent ones being risankizumab, a pipeline drug and Humira, a marketed drug belonging to the anti-TNFs category. Allergan, on the other hand, is currently working on brazikumab, an IL-23 inhibitor, the same category risankizumab falls in.

The merger has been approved on the condition that Allergan's late-stage IL-23 inhibitor brazikumab would be sold off. With this proposed sell off, the antitrust concerns would be allayed. After securing European approval, the companies are now looking towards the decision by the Federal Trade Commission in the United States. The companies had received a "second request" by the FTC, which sought additional information from both the parties.

The European Commission had concluded that original transaction would have resulted in the loss of innovation in IBD treatment segment since it would have caused AbbVie to discontinue development of Allergan's IL-23 inhibitor. By agreeing to sell brazikumab, the companies have ensured that potential treatment is given a fair chance of reaching the market. The companies now seek to identify a purchaser who may be in a position to continue the development of the drug candidate.

AbbVie recently announced that it plans to restructure Allergan's cosmetic portfolio including cosmetic botox, chin-fat-fighter Kybella and the Coolsculpting platform. The new unit will be called Allergan Aesthetics. This business unit had shown lethargic growth in the recent past and the spin-off will help addressing the fears of its negative impact on rest of the business. Some of the other products such as Vraylar and medical botox will be transferred to AbbVie.

AbbVie is proceeding ahead with the design of its new leadership team for the post merger entity. The Specialty and Eye Care business units will be merged with the existing AbbVie structure. These units included Women's Health, Gastrointestinal Diseases, Central Nervous System and Botox Therapeutics. AbbVie will absorb several of Allergan leaders into its fold after the merger.

AbbVie is based out of the United States while Allergan has its headquarter in Ireland. The latter is mainly engaged in four therapeutic areas which are neuroscience/central nervous system disorders, gastroenterology, eye care and medical aesthetics. AbbVie works in neuroscience/central nervous system disorders, immunology (including autoimmune diseases), oncology, metabolic diseases and virology.

With this merger, AbbVie is looking to create a niche position for itself and recoup the likely losses to be caused by increased competition to its blockbuster drug Humira. AbbVie is expected to focus on upcoming products such as Rinvoq and Skyrizi. Apart from these, Orilissa, Botox, Imbruvica and Venclexta are also expected to be the star products for the resulting entity. Out of these Orilissa is designed to treat endometriosis while the last two are for fighting cancer.

Akari Therapeutics Reports Positive Nomacopan Data

Akari Therapeutics (AKTX) stock showed a positive move as the company reported encouraging interim results for its Phase III PNH CAPSTONE study involving complement inhibitor naïve, transfusion-dependent PNH patients. The results showed that all the patients who were given nomacopan met the primary endpoint of transfusion independence. PNH is an orphan hematological condition and may devolve in a high mortality rate. Currently Eculizumab, a C5 complement inhibitor, is approved treating the condition. Nomacopan is also a C5 complement inhibitor but also has the ability to bind the proinflammatory eicosanoid leukotriene B4 (LTB4).

The interim data showed that four patients met the primary endpoint. These patients did not require transfusions for the first six months of treatment. However, all the four patients on placebo were given transfusions during the same time period. In this study, six out of eight patients enrolled were transfusion dependent before starting the treatment. Akari has conducted four trials so far and has treated 14 PNH patients. These four trials were Phase II, Phase III, PNH eculizumab resistant study, and PNH long-term safety and efficacy study. The company plans to report additional Interim Phase III data during the European Hematology Association Annual Congress which is scheduled to be held in June this year.

Akari is currently working to develop a higher concentration formulation of nomacopan. This new formulation will allow a small volume and low viscosity injection. The company has deferred the enrollment into the Phase III CAPSTONE study to take benefit of the new formulation.

Cryoport Slumps after Preliminary Q4 Results

Cryoport (CYRX) stock slumped as the company provided preliminary Q4 results. The final results are scheduled to be released on March 5th. The company expects its fourth quarter revenue to be at $9.2 million while consensus estimate stood at $10.4 million. Its full year 2019 revenue is expected to be $33.9 million, again falling short of consensus estimate of $35.1 million. However, even after posting lower than expected revenue numbers, the company will still be seeing healthy improvement on year over year basis.

While the news hit the stock in a negative manner, the growth story for Cryoport remains intact. The company CEO Jerrell Shelton emphasized that Cryoport has "the potential for new high-revenue commercial opportunities" in 2020 and beyond. It is likely that the company may provide positive guidance for the upcoming year during its final result announcements in March.

Cryoport deals in providing cold chain logistics solutions for temperature-sensitive life sciences materials. Its clients include biopharmaceutical, IVF and surrogacy and animal health organizations. The company offers various services such as Cryogenic Logistics Solutions, 2-8°C Logistics Solutions, Lab Move Solutions, Cold Chain Logistics Accessories and Cold Chain Logistics Consulting Solutions.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.