Big pharmaceutical companies splashed out big bucks in 2023 to acquire or license antibody drug conjugates, or ADCs. The trend is continuing into the new year with Johnson & Johnson reaching a $2 billion deal to acquire clinical-stage Ambrx Biopharma.
According to deal terms announced Monday, J&J will pay $28 cash for each Ambrx share, which is a 105% premium to the biotech’s closing stock price on Friday. In other biopharma deals, Merck is paying $680 million to acquire Harpoon Therapeutics, a developer of targeted cancer therapies, and Novartis is buying autoimmune disease drug developer Calypso Biotech for $250 million.
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[Paragraph updated to clarify authors of the report.] The deals come as the annual J.P. Morgan Healthcare Conference kicks off this week in San Francisco. Before the conference’s start, the financial services firm’s commercial banking division released its annual biopharma licensing and venture report, which tallied $128.8 billion in total biopharma upfront value across 112 acquisitions in 2023. ADCs are a highlight of the dealmaking totals in 2023, amounting to $4.6 billion in upfront cash and equity last year, the report states.
An ADC links a targeting antibody to a toxic drug payload, often a chemotherapy. Pairing the two delivers a lethal strike to cancer cells while sparing healthy cells. Lead Ambrx program ARX517 targets the protein PSMA and is in Phase 1 testing for advanced prostate cancer. In November, Ambrx reported encouraging data from a dose-escalation study and said it expects to have a recommended dose for Phase 2 testing in early 2024.
Ambrx had reached Phase 2 testing in breast cancers with ARX788, an ADC that targets the cancer protein HER2. But in 2022, the company paused this program’s clinical development, citing changes in the competitive landscape. Enhertu, a HER2-targeting ADC from partners Daiichi Sankyo and AstraZeneca, expanded its approved uses in 2022 with an FDA nod for treating breast cancer characterized by low levels of HER2. The therapy also won approval that year for treating non-small cell lung cancer that expresses HER2.
Daiichi Sankyo is a leader in ADC discovery, and its assets are progressing through partnerships. The newest partner is Merck, which last fall agreed to pay $4 billion up front to license three Daiichi Sankyo ADCs. The biggest ADC deal of 2023 was Pfizer’s $43 billion acquisition of Seagen. In other ADC dealmaking activity, AbbVie agreed to pay $10.1 billion to acquire ImmunoGen and its commercialized ovarian cancer ADC, Elahere.
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In the fourth quarter, there were fewer transactions but the deals that were done involved later-stage assets, which drove deal values higher, according to J.P. Morgan. Big pharma companies are shifting to later-stage in-licensing deals to mitigate risk.
“ADCs are positioned as a more proven technology relative to newer game-changing modalities seen with cell and gene therapy programs—speaking to the current appetite of big pharma for relatively de-risked programs,” the report said.
The Ambrx board of directors has approved the acquisition, which is expected to close in the first half of 2024. Here’s a look at the other two major biopharma M&A moves announced Monday:
Merck Spears Cancer Asset With Harpoon Therapeutics Acquisition
Merck’s cancer drug lineup is anchored by Keytruda. But looming patent expiration for this cancer immunotherapy is leading the pharma giant to look for other assets to grow revenue. In Harpoon Therapeutics, Merck gains a clinical-stage program addressing a promising target for solid tumors.
South San Francisco-based Harpoon researches T cell engagers, a type of drug that activates T cells to kill cancer cells. Some bispecific T cell engagers are approved and others are in development. These therapies work by simultaneously binding to a T cell and a cancer cell. Harpoon develops tri-specific T cell engagers. In addition to binding to a T cell and a cancer cell, the Harpoon therapies also have a domain that extends the therapy’s half-life.
Lead Harpoon drug candidate HPN328 is designed to target DLL3, a cancer protein expressed at high levels in small cell lung cancer and neuroendocrine tumors. The Harpoon therapy is in Phase 1/2 testing as a monotherapy in patients with advanced cancers that express DLL3. This trial is also evaluating the therapy in combination with Roche immunotherapy Tecentriq in patients with small cell lung cancer. In a note sent to investors, Leerink Partners analyst Jonathan Chang wrote that the firm believes Harpoon shareholders will welcome the deal because it places the biotech’s assets in the hands of a large pharma company with oncology expertise to drive their development in the competitive space for T cell engagers.
The deal terms call for Merck to pay $23 cash for each share of Harpoon. That price is a 118% premium to Harpoon’s closing stock price on Friday. Merck and Harpoon expect to complete the transaction in the first half of this year.
Novartis Expands in Autoimmune Disease With Calypso Buyout
Novartis is building up its autoimmune disease drug pipeline with the acquisition of privately held Calypso Biotech, a spinout of Merck KGaA. Amsterdam-based Calypso has particular expertise in antibodies that target interleukin-15, or IL-15. This signaling protein controls barrier function and plays a role in many chronic autoimmune diseases.
Lead Calypso program CALY-002 is an antibody that binds to and neutralizes IL-15. This program has reached phase 1b testing in celiac disease and eosinophilic esophagitis. Novartis said it plans to explore this antibody across many autoimmune indications, though it did not specify which ones.
According to the deal terms, Novartis will pay $250 million up front. Another $175 million is tied to the achievement of milestones.
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