EvaluatePharma’s EventAnalyzer delivers a weekly global round up of key events driving company valuations.

EvaluatePharma’s EventAnalyzer delivers a weekly global round up of key events driving company valuations.

Somaxon Pharmaceuticals has finally delivered a deal on Silenor, and it is an unusual one. For a fixed fee and royalties, Somaxon has hired the OTC sales force of consumer products giant Procter & Gamble for a September launch of the insomnia medication, a deal that leaves the smaller partner with nearly all of the potential revenue but also nearly all of the risk.

The deal points up the need for brand awareness in the highly competitive and genericised insomnia space as Somaxon executives focused on the reach P&G’s sales force will provide with primary care physicians, pharmacies and managed care plans. Somaxon shares jumped 29% higher Wednesday to reach $4.34 on news that a long-sought deal had finally be secured, a healthy gain but still less than half the $9.21 they closed at on March 18, following FDA approval of Silenor ( Somaxon wins approval for Silenor and hunt for partner begins , March 19, 2010 ). Investors clearly remain sceptical about the commercial potential of this product, even with P&G on board.

Kamada has wasted no time capitalising on US approval for its protein replacement therapy, Glassia, won only last month ( Kamada wins US approval for new AAT therapy as report prompts controversy , July 09, 2010 ). Today the company revealed that pharma giant Baxter International has been signed up to sell the treatment for alpha-1 antitrypsin (AAT) deficiency in the US, Canada, Australia and New Zealand.

EvaluatePharma’s EventAnalyzer delivers a weekly global round up of key events driving company valuations.

Savient Pharmaceuticals’ upcoming approval decision in the US for gout therapy Krystexxa, due by September 14, has big ramifications, not least because the company has said it will seek a buyer once a marketing license is in the bag. However, opinions on the drug’s prospects differ wildly.

Although Savient recently expressed confidence in gaining approval on schedule, many financial analysts are less sure. Views on the drug’s ultimate commercial potential are also split. Investors are no doubt hoping for a bidding war to break out for the company, which is currently valued at just over $1bn. For that to happen the FDA's view on the drug needs to be heard, meaning all interested parties will be waiting intently on the regulator's decision.

EvaluatePharma’s EventAnalyzer delivers a weekly global round up of key events driving company valuations.

In a clear victory for shareholder activism, Penwest Pharmaceuticals appears to have convinced its long-term partner Endo Pharmaceuticals to put it out of its misery – yesterday Endo agreed to acquire Penwest for a relatively modest $5 in cash per share, or $168m in total. Modest in that $5 is only a 19% premium on the previous closing price yet the shares have not exceeded $5 in over two and a half years, during which time they hit a record low of just 37 cents.

As for Endo, the deal looks a steal, consolidating as it does all profits from the Opana ER pain product franchise, prompting the company to immediately raise its earnings guidance for the current year. As such the deal is likely to be met with applause from shareholders keen for the specialty group to make good use of its $1bn cash pile, in stark contrast to the deafening boos that greeted its ill-fated $370m acquisition of Indevus Pharmaceuticals last year ( Endo hits the acquisition trail , January 6, 2009 ).

Victory for activists

The past two years have seen a battle for control of Penwest, triggered by a major decline in the company’s valuation. In February 2006 the stock traded around $22, yet by November 2008 Penwest shares hit that record low of 37 cents, mostly related to uncertainty over the patent life of Opana ER ( Opana pain continues for Penwest , September 30, 2008 ).

Opana ER is a long-acting formulation of the strong analgesic oxymorphone, developed using Penwest's TIMERx technology and marketed by Endo in the US.

Penwest and Endo recently secured some important deals with generics challengers, such as Impax Laboratories and Sandoz, to delay the launch of certain dosages of generic Opana ER until January 2013. This generated decent share price growth so far this year of 63%. However it seems this was not enough for its activist shareholders.

Chief of the activists appears to have been Tang Capital Partners, which started buying up Penwest shares at the end of 2008 and beginning of 2009, when the stock traded between $1.13 and $1.24, ending up with a 21% stake.

Meanwhile Tang’s wingman, Perceptive Life Sciences Master Fund, first acquired a small stake in 2001 when the stock was valued at around $22, but only significantly increased its stake during 2008 and 2009, from 10% to 20%, again at low prices from $1 to $2.

Both Tang and Perceptive have gradually been wresting control of Penwest’s board of directors, their representatives now sitting at five of eight board seats while Tang’s managing director, Kevin Tang, was recently elected as Penwest’s chairman.

If the strategy has been clear for some time now, the saga appears to have reached its most logical conclusion with the acquisition by Endo – at $5 a share both major shareholders will be pocketing a decent return on their investment.

No brainer

The two companies have been a long-term partners, Endo struck a deal to utilise Penwest’s delayed release technology back in 1997.

Opana ER has been the main fruit from this collaboration and the drug has been an important growth driver for Endo in the last few years. Sales are expected to peak this year at $277m before some generic versions and dosages start to enter the market in 2011 ( Modest encouragement for Penwest , February 23, 2009 ).

Yet Penwest earns royalties of 22%-30% on Opana ER sales, hence the acquisition will provide Endo with all the profits, albeit the biggest benefit will be relatively short-lived.

Even with significant sales erosion expected over the next few years, EvaluatePharma’s NPV Analyzer  currently values Opana ER at $223m, making the $168m acquisition, or $144m on an enterprise level, look like a good piece of business.

In addition to Opana ER, Penwest’s technology platform can also be applied to various branded and generic products while the company also has a promising phase II Friedreich's ataxia candidate in A0001, all of which appear to be coming free to Endo at the acquisition price.

Endo’s shares hit an 18-month high of $25.84 in early trading today, suggesting investors are happy with the deal and no doubt hopeful of further shrewd transactions.

EvaluatePharma’s EventAnalyzer delivers a weekly global round up of key events driving company valuations.

As upfront fees for clinical stage assets appear to be on the slide, EP Vantage  takes a look at what this might mean for some of the most valuable pipeline assets yet to find a commercial partner ( First half 2010 sees a return to more conventional deal values , July 28, 2010 ).

Based on EvaluatePharma’s NPV Analyzer , the table below shows the ten biggest R&D candidates whose high valuation is massively dependent not only on clinical and regulatory success but also on finding a suitable big pharma partner. Top of the list is Clinical Data’s high-risk but potentially high-value antidepressant, vilazodone, while the appearance of Vivus and Orexigen’s obesity candidates comes as no surprise. Intriguingly, however, three recent IPO companies in the US – Anthera Pharmaceuticals, AVEO Pharmaceuticals and Alimera Sciences – all feature, an insight perhaps into how they hope to attract partnering interest by taking a plunge into the public pool.

The bulk of the in-market sales, and therefore royalties, for the products in the table below are expected to come from as yet unconfirmed partners.