Say what? Allergan just agreed to pay a 6X cash premium for Tobira and its troubled PhIII NASH drug

Print 20 September 2016
John Carroll / ENDPOINTS

A couple of months after a trial setback crushed Tobira’s share price, Allergan $AGN has swooped in to buy the company for $29.35 a share and up to $49.84 a share in contingent value rights if its late-stage NASH drug turns out to be a hit.

That cash price is more than six times what Tobira’s battered stock $TBRA closed at yesterday, a virtually unheard of premium in a market that is already applying high values to biotech assets. The total value for the company will range up to $1.7 billion. The company stock traded for $4.74 at the close yesterday, with a market cap of $89 million.

The buyout stunner comes courtesy of Allergan CEO Brent Saunders, who has been on a deal spree that includes the Vitae acquisition a few days ago. These kind of bolt-on acquisitions are a tempting target for Allergan’s CEO, especially since its merger with Pfizer fell through. Allergan recently closed on a pact to sell a generics unit to Teva, leaving it with a hefty sum in cash reserves for deals like this.

Analysts had to do a double take on the numbers involved.

“In our recollection, the upfront alone places the highest premium we’ve ever seen on a deal, and not just in biotech,” noted Baird’s Brian Skorney. “Not to mention, the valuation placed on some of the milestones is, in our opinion, excessive. Tobira has indicated plans to initiate a Phase III trial next year, on which Allergan has agreed to pay $13.68 per CVR for enrollment of the first patient.”

The deal also marks a big bet on NASH, or fatty liver disease, which has been growing at an epidemic pace around the world. Allergan is adding cenicriviroc and evogliptin to its pipeline, and the company says it will look for additions to beef up its new NASH effort.

Cenicriviroc flunked a Phase IIb study for NASH in July, but the South San Francisco-based biotech said it got enough positive data on a secondary endpoint to warrant a move into a pivotal Phase III program. Tobira’s shares were crushed by the news, plunging 64%.

The primary endpoint in the study, which registered 289 patients, was a drop in a score for disease activity in NASH. On that point, the drug flopped. It also failed a secondary endpoint for complete resolution of steatohepatitis.

But Tobira vowed that it had a good reason to launch a late-stage program, looking for an improvement in fibrosis without any worsening of steatohepatitis. The data for the intent-to-treat population in Phase IIb was 20% for the drug vs. 10% for placebo after a year of treatment, p=0.02; in other words, twice as many patients on drug had a marked improvement for fibrosis, but it was a small group.

Still, it was big enough to encourage Allergan to leap in.

Said Allergan R&D chief David Nicholson:

“Importantly, NASH treatment may well require a multi-therapeutic approach to address the multiple factors of the disease. CVC has been shown in clinical trials to provide significant improvement in liver fibrosis, the hallmark of NASH. Liver fibrosis is associated with key long-term outcomes, including overall mortality, liver transplantation and liver-related events.  Evogliptin, in preclinical models, has been shown to decrease hepatic glucose production, improve hepatic triglyceride content and steatosis, and reduce histologic markers of inflammation of the liver. Together, these programs provide a highly complementary potential therapeutic approach to address the inflammatory, metabolic and fibrotic elements of NASH that the medical community will need to treat this condition.”

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