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Daiichi Sankyo is poster company for sector ripe for M&A

by Adam Steinhauer  |  Published August 17, 2011 at 5:34 PM
Just a few months after Daiichi Sankyo Co. Ltd. purchased biotech Plexxikon Inc. of Berkeley, Calif., for nearly $1 billion, the Japanese pharmaceutical company is reaping the benefits.

A drug developed by Plexxikon and now owned by Daiichi, vemurafenib, was approved for treating metastatic melanoma by the U.S. Food and Drug Administration, the company said Wednesday.

The acquisition of Plexxikon and subsequent drug approval could provide other big drug companies insight into the benefits of making a deal in cancer. Daiichi and its partner Roche Holding AG plan to share the marketing of the melanoma drug, to be sold as Zelboraf, which analysts said could reach sales of nearly $500 million by 2015 and as much as $1 billion eventually.

Other small pharma or biotech companies with cancer treatments are abundant, and thus could be attractive acquisition targets. But what appears to have made Plexxikon's cancer treatment the right kind of deal for Daiichi, as well as a potential blockbuster drug, is that it is a personalized medicine.

Zelboraf targets a protein mutation believed to be associated with the most deadly cases of melanoma. Results from use of the drug in late-stage trials were quite positive. The risk of death was reduced by 56% for patients who took the drug compared to those who received chemotherapy.

Daiichi said the approval was a milestone for personalized treatments that target cancer.

"Our growing understanding of the biology of cancer will allow Daiichi Sankyo to continue developing a balanced portfolio of small molecules and antibodies through our own efforts and in collaboration with our partners," Glenn Gormley, chief science officer and president of Daiichi Sankyo Pharma Development, said in a statement.

Other personalized cancer treatments might make their owners acquisition targets. Seattle-based Dendreon Corp. has been on most buyout lists for years because of Provenge, its personalized therapy. Interest in the company has suffered substantially in recent weeks, however, after Dendreon admitted that Provenge sales have been lower than expected.

New York-based Ziopharm Oncology Inc. is a company with multiple small-molecule drugs in Phase 1 or Phase 2 that target specific types of cancer. It has multiple collaboration agreements on its drugs and is involved with Randal J. Kirk, the billionaire investor and successful dealmaker.

Companies such as Gilead Sciences Inc. of Foster City, Calif., are making acquisitions as they try to further develop personalized cancer treatments and build their own internal cancer research. Gilead is considering increasing its knowledge of genome sequencing.

"Ten years from now, if you have any cancer, or precancer, you will be sequenced, and based on the genetic changes identified, you will be assigned treatments," Norbert Bischofberger, Gilead's chief scientific officer, told Bloomberg News.

In the past year, deals for all types of cancer companies, not just personalized businesses, have made fodder for headlines.

When Daiichi bought Plexxikon in February, its Tokyo-based rival Astellas Pharma Inc. agreed to develop and possibly market anti-cancer medication tivozanib with Cambridge, Mass.-based Aveo Pharmaceuticals Inc.

A month earlier, Amgen Inc. of Thousand Oaks, Calif., agreed to pay up to $1 billion for Woburn, Mass.-based BioVex Inc. and its treatment for solid tumors.

Gilead paid $225 million in December for Arresto Biosciences Inc. More recently, in February, the company paid $375 million for Calistoga Pharmaceuticals Inc. and its pipeline treatment for non-Hodgkin's lymphoma.

Michael Becker, founder of MD Becker Partners LLC, said M&A in the cancer space is likely to continue. Successes with immunotherapies that target specific areas such as melanoma have companies looking around.

"There is increasing optimism for melanoma therapies and cancer immunotherapy approaches in particular," said Becker, a former biotech executive.

And plenty of partnerships, which could speculatively lead to acquisitions, already exist among Big Pharma and biotech. One example is a partnership on a non-small-cell lung cancer drug made by Seattle-based Oncothyreon Inc., known as Stimuvax, with Merck KGaA of Darmstadt, Germany. Stimuvax, a vaccine, is believed to have blockbuster potential.
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Tags: biotech | biotech M&A | cancer treatment | Daiichi Sankyo | healthcare | melanoma | pharma | Plexxikon | Rocha Holding | vemurafenib | venture capital

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