Takeda shells out whopping $5.2B for Ariad, Iclusig and its fledgling med brigatinib

In theory, Takeda just snapped up the kind of deal that major drugmakers are all shopping for: Ariad Pharmaceuticals, a cancer-focused drugmaker with a marketed product to bring in current revenue and a pipeline that offers near-term prospects.

In a deal valued at $5.2 billion, Takeda plans to shell out $24 per share for Ariad and its leukemia drug Iclusig and its late-stage ALK-inhibiting lung cancer drug brigatinib, now under priority review at the FDA. That’s a jumbo-sized 75% premium to Friday’s closing price.

With the patent on its blockbuster multiple myeloma med Velcade expiring this year, Takeda reportedly set aside $15 billion last fall to make deals, focusing on cancer, gastrointestinal disorders and neurological diseases. Its new Crohn’s disease drug, Entyvio, has taken off quickly, as has its top seller’s intended successor, Ninlaro, but the company needs more than a couple of products to make up the Velcade difference in the near term.

Meanwhile, the company has been completely overhauling its R&D, jettisoning some drug partnerships, striking new ones and cutting back its clinical operations in the U.K. It’s centering its R&D on two hubs in Japan and Boston, plus a biotech-oriented research center in San Diego.

Ariad is an obvious fit with Takeda Oncology, with its expertise in blood cancers and desire to branch out into different forms of the disease. In a Monday note, SunTrust’s Yatin Suneja called Ariad “a very attractive commercial stage oncology biotech,” and called brigatinib a “likely best-in-class ALK+ inhibitor” that’s likely to win approval by its FDA due date of April 29.

Analysts see Iclusig as a $500 million-plus product at peak, and those two meds could be bringing in $2 billion in U.S. sales next decade, Suneja said.

Takeda could be taking on a bit more than Iclusig's revenue, however, unless the drug-pricing debate in the U.S. cools down considerably. One reason Iclusig has been so successful in recent periods is that its price has jacked up repeatedly—once per quarter last year, in fact, to the point where its list price sits at $199,000, up from $115,000 when approved in 2012. 

Those increases put Ariad in the sights of some lawmakers investigating drug prices—in this case, Sen. Bernie Sanders and Rep. Elijah Cummings, who’ve demanded documents about Iclusig’s sales numbers and pricing decisions.

Still, though pricing scrutiny isn’t good for a company’s image, in most cases it hasn’t done much to directly bring down prices. The pricing outcry over Mylan’s EpiPen, for instance, didn’t hit its list price, though sales are expected to come down considerably thanks to the company’s appeasement offer of an authorized generic.

Meanwhile, there’s another potential danger ahead: a rival bidder. The combo of revenue-plus-pipeline is a coveted one in pharma M&A these days, and some companies have been willing to pay quite a premium. Pfizer ponied up $14 billion for Medivation and its prostate cancer med Xtandi, and both Johnson & Johnson and Sanofi appear ready to pay a pretty penny for Actelion and its cardiovascular portfolio.

“Given the scarcity of commercial-stage oncology assets, and significant synergies that could be extracted with an established oncology player, it is possible that other bidders emerge,” Suneja said, calling the price “fair” at 2.6 times the firm’s peak revenue forecast.

Rival suitors would have to step up quickly, and might not have a chance in any case, however, Leerink Partners analyst Michael Schmidt pointed out in a Monday note; the deal is set to close by the end of February and both companies’ boards have already voted in favor.

“The deal confirms our investment thesis on [Ariad] and in our view reads through positively to other commercial-stage oncology stocks” including Exelixis and Incyte, Schmidt wrote. The premium price “highlights the scarcity value of these growth assets,” he added. Takeda expects the buy to add to earnings beginning in 2018.