Roche Making up for Lost Time with Anadys Purchase

October 17, 2011 Roche making up for lost time with Anadys purchase

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Roche’s $230m acquisition of Anadys Pharmaceuticals today highlights the Swiss group’s attempts to gain some ground in a race in which it surprisingly lags the competition. Having dominated the treatment landscape for hepatitis C for the last ten years with best-selling interferon and ribavirin standard of care products in Pegasys and Copegus, Roche has struggled to keep pace with the development of novel therapies which are set to revolutionise the field.

The Anadys deal means Roche now has a pipeline of candidates from each of the three most encouraging new classes of hepatitis C drug (see table below). Yet the Swiss healthcare giant’s progress to this point has been disappointingly slow, hampered by some in-house research failures and partnering choices which so far appear to have backed the wrong horse. Further deals will be required if Roche is to make up for lost time.

Opportunistic

Anadys’ lead pipeline candidate is setrobuvir (ANA598), a non-nucleoside polymerase inhibitor, a class of drug also referred to as ‘non-nukes’ (Therapeutic focus - Novel hep C class get another big backer, October 17, 2011). Somewhat coincidentally, Anadys recently reported encouraging interim data from a phase IIb trial, although longer term data needs to be positive to confirm setrobuvir’s potential (Anadys data encouraging but stronger signals needed, October 13, 2011).

Roche’s move suggests the Swiss company is supremely confident in Anady's drug, although there must also be an element of opportunism, given the US company's remarkably low enterprise value of just $34m. Positive longer-term data later this year would have put Anadys in the deal spotlight once more, increasing its valuation and partnering or acquisition interest from Roche’s big pharma peers.

Roche is acquiring Anadys for $3.70 per share in cash, almost four times the Californian company’s closing share price on Friday of $1.04. Considering Anadys’ share price surged to $7.48 in early 2009 on high partnering hopes following positive phase Ib data for setrobuvir, Roche’s purchase price could turn out to be a bargain.

Plugging the gaps

Setrobuvir completes Roche’s set of promising hepatitis C candidates, all in phase II and sourced externally. Danoprevir was licensed from InterMune in 2006 - the protease inhibitor is a member of the same class as recently launched potential blockbusters Vertex’s Incivek and Merck & Co’s Victrelis.

Mericitabine is a nucleoside polymerase inhibitor, widely regarded as the most promising class of novel agent, and emerged from a 2004 deal with Pharmasset. Roche - Hepatitis C Clinical Stage Pipeline

Total Status Pharmacological Deal Deal Status Product Strategy Deal Partner on Class Date Value Deal ($m)

Hepatitis C Phase Mericitabine Pre- Oct- nucleoside In-licensed Pharmasset 300 II (RG7128) clinical 2004 polymerase inhibitor

In- Danoprevir Hepatitis C protease Phase Oct- licensed/Product InterMune 495 (RG7227) inhibitor II 2006 acquisition

Hepatitis C non- Setrobuvir Company Anadys Phase Oct- nucleoside 230 (ANA598) Acquisition Pharmaceuticals II 2011 polymerase inhibitor

Matrix (out-licensed to Pre- Nov- CTS-1027 metalloprotease Organic Conatus - clinical 2006 (MMP) inhibitor Pharmaceuticals)

Hepatitis C Phase RG7432 nucleoside Organic Organic - - - I polymerase inhibitor

Hepatitis C RO5428029 nucleoside Organic Organic - - - polymerase inhibitor

Company Anadys Oct- ANA773 TLR7 agonist Phase I - Acquisition Pharmaceuticals 2011

Back in phase I are two further nucleoside polymerase inhibitors in RG7432 and RO5428029, both developed in Roche’s labs, and now Anadys’ second clinical stage candidate ANA773, an interesting compound which stimulates endogenous interferon by acting on the toll like receptor pathway.

Missed opportunities

According to EvaluatePharma pipeline data, Roche has abandoned at least six clinical stage candidates as novel agents for hepatitis C. Initial research focused on developing follow-on compounds to ribavirin - a couple of agents were scrapped in phase I and levovirin reached phase II studies before being ditched on efficacy grounds at the end of 2003.

Perhaps Roche’s most disappointing setback came in the third quarter of 2008 when the company scrapped further development of R1626, a nucleoside polymerase inhibitor which was leading the way in this promising class. Unfortunately some undisclosed safety findings emerged from a phase IIb study, forcing the company to fall back on its collaboration with Pharmasset.

Indeed, the deal with Pharmasset itself highlights a missed opportunity of sorts. The development of mericitabine, and a follow-on agent in the same class (R1656) which was subsequently abandoned in 2006 during phase I studies, has been surpassed and overshadowed by Pharmasset’s progress with two other nucleoside polymerase inhibitors, PSI-7977 and PSI-938.

The potential of these compounds, particularly in combination with other agents, offers hope that treatment of hepatitis C could eventually move beyond the standard of care with interferon and ribavirin. Expectations for these products are sky-high and Pharmasset is easily the hottest biotech stock at the moment, currently valued at over $6bn by the stock market.

The purchase of Anadys is Roche’s first company acquisition in this space. Back in 2004 when Roche started working with Pharmasset, the biotech was a private company. Executives at Roche must wonder what might have been had they bought Pharmasset back then, or struck a broader collaboration to get rights to the company’s crown jewels which appear to offer the most potential.

Whatever the ‘ifs’, ‘buts’ and ‘maybes’, looking to the future it seems likely Roche will strike more deals to get back into the race having been stuck in the pit lane for some time. More from Evaluate Vantage

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