Allergan (NYSE:AGN) acquired Tobira (NASDAQ:TBRA) and its Phase II NASH drug in a deal valued at $1.7 billion on September 20. On the same day Can-Fite BioPharma (NYSEMKT:CANF) announced new data on its Phase II ready NASH drug CF102. The upfront payment alone dished out by Allergan totaled $28.25 per share, a 500% premium on Tobira stock, which closed at just $4.74 on September 19. $49.84 more per share will be paid if Tobira meets certain milestones, for a total $78.09 per share, a 1750% premium for Tobira investors. This valuation metric could mean magic for Can-Fite investors.
$1.7 billion in total acquisition payments come despite the fact that Tobira actually missed the primary endpoint in a Phase IIb study of its NASH drug, cenicriviroc (CVC). This points to how hot the NASH market is and the intense competition amongst big pharma companies to get into the NASH game and get in fast.
All for good reason, given that Deutsche Bank projects annual sales of NASH drugs to be in the $35 - $40 billion range by 2025 and mainstream Newsweek magazine called NASH "The 21st Century's Looming Public Health Threat". 25 million Americans will have NASH by 2025. There is no FDA approved therapy on the market and the race is on.
Allergan's valuation of Tobira indicates Can-Fite investors who have seen their stock trading in the $2.50 range, could fetch $12.50 per share, just for an upfront payment, and another $23.75 for milestones payments, for a total of $46.25 per share in the event of an acquisition. This is markedly higher than even the $6.00 per share target price assigned the stock by Rodman & Renshaw on August 29, before the Tobira acquisition re-set expectations on M&A valuations in the NASH space.
A little known yet lethal disease, as pointed out in my prior article about Can-Fite, NASH which stands for non-alcoholic steatohepatitis, is the advanced form of non-alcoholic fatty liver disease (NAFLD) characterized by fat build up in the liver. Incidence rates in the U.S. and around the world have unfortunately been exploding, as NASH is associated with risk factors including obesity, high cholesterol, and diabetes.
Allergan CEO Brent Saunders justified NASH drug valuations in his statement, "With the increasing rates of diabetes, obesity and other metabolic conditions in the U.S. and in developed nations globally, NASH is set to become one of the next epidemic-level chronic diseases we face as a society. It is important that we invest in new treatments today so that healthcare systems, providers and patients have treatment options to face this challenge in the coming years."
Other players in the NASH market include Intercept Pharmaceuticals (NASDAQ:ICPT) and Genfit (GNFT.PA) both in Phase III with their NASH drugs. Gilead Sciences (NASDAQ:GILD) got into the NASH space itself through two product acquisitions, paying $470 million to Phenex Pharmaceuticals for Px-104, a Phase II NASH drug; and paying $400 million with an additional $800 million in milestone payments to Nimbus Therapeutics for NDI-010976 which had only completed Phase I in April of this year when it was acquired.
When a failed Phase IIb NASH drug is acquired for $1.7 billion, apparently the bar is not set very high in terms of clinical success and efficacy. While missing its primary efficacy endpoint, Tobira's CVC did reduce fibrosis without worsening NASH in 20% of treated patients versus 10% in placebo. Intercept's Phase II trial for OCAs, which has now advanced into Phase III, improved fibrosis in 35% of treated patients versus 19% in placebo. If success is declared when only up to 35% of patients benefit from a drug, then that leaves huge therapeutic and market opportunities in an indication where no drug yet completed Phase III.
Can-Fite's CF102 is well positioned. Combining the drug's preclinical efficacy findings in NASH with the fact that the drug is already in a global Phase II liver cancer trial bodes well. Orphan Drug Designation has been granted to CF102 in the treatment of liver cancer by both the U.S. FDA and the European Medicines Agency (EMA). It also has Fast Track Designation in the U.S.
Set to begin a Phase II study of CF102 to treat NASH/NAFLD, Can-Fite will enroll 75 patients. The double blind, placebo controlled, study will use measures including a reduction in liver fat, something CF102 has already proven it can do in preclinical studies.
Micro-cap biotech Tobira had a market cap of $89 million the day before it was acquired at a 500% to 1750% premium. It had two drugs in its pipeline, CVC, which Allergan claims is Phase III ready despite missing the primary endpoint of its Phase IIb trial, and Evogliptin just entered Phase I. This pales in comparison with Can-Fite's portfolio which includes CF102 headed into Phase II for NASH and nearing completion of enrollment in Phase II for liver cancer. Bonus, Can-Fite also has Piclidenoson, headed into two Phase III trials addressing multi-billion dollar autoimmune disease markets, all for a market cap under $30 million. Can-Fite makes for a very attractive acquisition target.
RAY DIRKS Research suggests that Readers/Investors place no more than 1% of the funds they devote to common stocks in any one issue. It's best to diversify.
Disclosure: I am/we are long CANF.