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Business Report Portfolio Update Q4 2022

Portfolio Update Q4 2022

The fourth quarter 2022 provided multiple major milestones for our portfolio holdings such as clinical results, regulatory decisions, licensing deals and some takeovers. The clinical results for the biotechnology industry and our portfolio saw a more positive picture in the last quarter. The difficult capital market environment influenced industry behavior, resulting in more licensing deals as an alternative source of non-dilutive access to capital. Additionally, opportunistic takeover activity focused on commercial-stage companies and lifted the acquisition targets towards their all-time highs thanks to the premiums offered.

Several milestones including clinical trial data

The late-stage trial read-outs in our portfolio were mixed in the last quarter of 2022. Esperion announced that the cardiovascular outcomes trial for Nexletol (bempedoic acid) met the primary endpoint. The company’s landmark trial of over 14 000 patients demonstrated statistically significant risk reduction in MACE-4 in patients treated with 180 mg/day NEXLETOL compared to placebo. Detailed results will be presented as a late-breaking abstract at the Annual Scientific Session & Expo with World Congress of Cardiology in March 2023.

Exelixis announced that the Phase III CONTACT-01 study did not meet its primary endpoint at the final analysis. In patients with metastatic non-small cell lung cancer who experienced disease progression on or after treatment with an immune checkpoint inhibitor and platinum-containing chemotherapy, Cabometyx (cabozantinib) in combination with Tecentriq (atezolizumab) did not improve the overall survival versus docetaxel.

The ever evolving SARS-CoV-2 strains remain a challenge for developing booster shots.

The ever evolving SARS-CoV-2 strains remain a challenge for developing booster shots. Moderna announced that its novel mRNA vaccines achieved strong neutralizing titers against multiple Omicron variants. In a Phase II/III study, a 50 µg booster dose of mRNA-1273.222 elicited a superior neutralizing antibody response against Omicron BA.4/BA.5 variants when compared to a 50 µg booster dose of mRNA-1273 (Spikevax) in previously vaccinated and boosted participants.

Promising proof-of-concept data was reported by many portfolio companies in the fourth quarter of 2022. Moderna together with its partner Merck announced top-line results from a Phase IIb KEYNOTE-942 study for mRNA-4157/V940, an investigational personalized mRNA cancer vaccine in combination with Keytruda. mRNA4157/V940 demonstrated a statistically significant and clinically meaningful improvement (44% risk reduction) in recurrence-free survival (RFS) versus Keytruda alone as adjuvant treatment in patients with stage III/IV melanoma following complete resection. Merck had opted into a joint development and commercialization collaboration earlier on, and both companies are expected to start multiple registrational trials for mRNA-4157/V940 in combination with Keytruda in different adjuvant settings.

Promising proof-of-concept data was reported by many portfolio companies in the fourth quarter of 2022.

Ionis with its development partner GSK presented positive Phase II study results for bepirovirsen, an investigational antisense oligonucleotide treatment for patients with chronic hepatitis B virus. The results showed that treatment with bepirovirsen resulted in sustained clearance of hepatitis B surface antigen (HBsAg) and hepatitis B virus (HBV) DNA for 24 weeks after end of bepirovirsen treatment in people with chronic hepatitis B. GSK has announced to start registrational Phase III trials in 2023.

Arvinas announced results from the Phase II cohort expansion portion with ARV-471, a novel PROTAC estrogen receptor protein degrader. 38% of evaluable patients achieved a clinical benefit and a favorable tolerability profile was presented. ARV-471 is being co-developed with Pfizer for the treatment of patients with advanced or metastatic estrogen receptor positive, HER2 negative breast cancer patients. The companies expect to start the ARV-471 Palbociclib combination trial in the second half of 2023.

Neurocrine announced that its investigational NBI-827104 did not meet its primary endpoint in the II STEAMBOAT study evaluating the efficacy, safety, tolerability and pharmacokinetics of NBI-827104 compared to placebo in pediatric patients with epileptic encephalopathy with continuous spike-and-wave during sleep. Overall, NBI-827104 was generally well tolerated.

One of our most recent investments, Celldex Therapeutics, announced new data for its open-label Phase Ib clinical trial of barzolvolimab in patients with antihistamine refractory chronic inducible urticarias. Additionally, all cold urticaria patients achieved a complete response after treatment of a single dose of barzolvolimab, a humanized monoclonal antibody binding the receptor tyrosine kinase KIT, blocking mast cell activation.

Numerous regulatory decisions milestones

BB Biotech’s portfolio holdings updated on multiple regulatory decisions in the fourth quarter 2022 such as:

Beneficial collaborations in the last quarter of 2022

Non-dilutive capital contributions have become and attractive new source of funding for smaller companies that suffered steep share depreciations over the last 18 months. Platform companies are ideally positioned to weather the situation. Macrogenics and Gilead announced an exclusive option and collaboration agreement to develop MGD024, an investigational, bispecific antibody that binds CD123 and CD3 using Macrogenics’ DART® platform, and two additional bispecific research programs. As part of the agreement, Gilead will pay Macrogenics an upfront payment of USD 60 mn and Macrogenics will be eligible to receive up to USD 1.7 bn in target nomination, option fees, and development, regulatory and commercial milestones. Macrogenics will also be eligible to receive tiered, double-digit royalties on worldwide net sales of MGD024 and a flat royalty on worldwide net sales of products under the two research programs.

Similarly, Mersana announced a research collaboration and commercial license agreement with Merck KGaA to discover novel Immunosynthen ADCs directed against up to two targets. Immunosynthen, Mersana’s proprietary STING-agonist ADC platform, is designed to generate systemically administered ADCs that locally activate STING signaling in both tumor-resident immune cells and in antigen-expressing tumor cells, unlocking the anti-tumor potential of innate immune stimulation. Mersana will receive an upfront payment of USD 30 mn and is also eligible to receive reimbursement of certain costs, up to USD 800 mn in potential regulatory, development and commercial milestone payments, and tiered royalties up to the low double-digit percentages on worldwide net sales of any approved ADCs developed under the agreement.

An even broader collaboration deal was signed between Wave Life Sciences and GSK. The collaboration covers Wave’s oligonucleotide therapeutics, including the company’s preclinical RNA editing program targeting alpha-1 antitrypsin deficiency (AATD), WVE-006. The discovery collaboration has an initial four-year research term. It combines GSK’s unique insights from human genetics, as well as its global development and commercial capabilities, with Wave’s proprietary discovery and drug development platform, PRISMTM. Under the terms of the agreement, Wave will receive an upfront payment of USD 170 mn, which includes a cash payment of USD 120 mn and a USD 50 mn equity investment. For the WVE-006 program, Wave is eligible to receive up to USD 225 mn in development and launch milestone payments and up to USD 300 mn in sales-related milestone payments, as well as tiered sales royalties. Development and commercialization responsibilities will transfer to GSK after Wave completes the first-in-patient study. For each of GSK’s eight collaboration programs, Wave will be eligible to receive up to USD 130 to 175 mn in development and launch milestones and USD 200 mn in sales-related milestones, along with tiered sales royalties. Wave will lead all preclinical research for GSK and Wave programs up to investigational new drug (IND) enabling studies. GSK collaboration programs will transfer to GSK for IND-enabling studies, clinical development, and commercialization. The collaboration includes an option to extend the research term for up to three additional years, expanding the number of programs available to both parties.

Agios extended its cash run rate even further by enhancing its balance sheet situation through a monetization of its remaining Tibsovo royalty rate. The company has sold its rights to 5% royalties on U.S. net sales of Servier’s TIBSOVO (ivosidenib tablets) to Sagard for a one-time payment of USD 131.8 mn and retains its rights to a potential future milestone payment of USD 200 mn for vorasidenib, as well as 15% royalties on U.S. net sales of vorasidenib.

Selective takeover activity in the fourth quarter

With M&A activity still at low levels and mostly focused towards revenue-generating biotechnology companies, two larger deals being Amgen bidding for Horizon and Pfizer for Biohaven supported the sector somewhat. BB Biotech has not participated in these two large deals but benefited by Sumitomo Pharma announcing an offer for Myovant, initially for USD 22.75 per share followed by a slightly higher bid at USD 27 per share in cash. The transaction is substantially below our internal valuation assumption and will require approval from the minority shareholders.

In contrast to having portfolio companies being taken over, larger and more established companies such as Incyte are continuously looking for companies, assets and technologies to improve their pipeline and product offering. Incyte announced the acquisition of Villaris, a privately held company focused on autoimmune diseases, with its lead molecule auremolimab to be developed for vitiligo. Under the terms of the agreement, Incyte will acquire Villaris and the exclusive global rights to develop and commercialize auremolimab for all uses, including in vitiligo and other autoimmune and inflammatory diseases. Incyte will make an upfront payment of USD 70 mn, and Villaris shareholders will be eligible of up to USD 310 mn upon achievement of certain development and regulatory milestones, as well as up to an additional USD 1.05 bn in commercial milestones on net sales of the product.

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