$50 billion in products were 'returned' to rationalize those blockbuster BD deals

In 2020, Bristol-Myers Squibb and Dragonfly successfully joined hands and reached a blockbuster deal of up to $50 billion. However, two years later, this hopeful beginning was caught off guard and ended by Bristol-Myers Squibb.

On February 2, Dragonfly announced that Bristol-Myers Squibb returned all rights to the IL-7 fusion protein DF6 to the company after paying $5 million.

In other words, Bristol-Myers Squibb returned, and this $50 billion BD fell through.

In fact, in the past year, there have been many examples of big pharma working halfway through with Biotech and breaking up. For example, Johnson & Johnson terminated its partnership with Fate, a pioneer in the IPSC field; In another example, Sanofi returned the worldwide rights to the SHP-2 inhibitor RMC-4630 to Revolution.

Back in China, at present, domestic innovative drugs are accelerating to the sea, and heavy BD transactions are frequent. Every blockbuster deal triggers investors' unlimited reverie about these companies.

Flowers go the same way as thorns. Under this round of license out wave, these big pharmaceutical return events remind us that even for those heavy BD deals, we cannot be blindly optimistic.

01 

A blockbuster deal worth $50 billion

On August 2020, 8, Bristol-Myers Squibb announced:

With a $4 million down payment and performance-based development, regulatory and commercial milestone payments, Dragonfly's undergrounded immunotherapy DF75 is licensed worldwide.

The industry estimates that the total value of the deal will reach up to $50 billion.

Big pharma "buy, buy, buy" is the norm, and Bristol-Myers Squibb, which is not bad money, is even more so. At the end of 2019, Bristol-Myers Squibb spent a huge US$740 billion to acquire Celgene, creating the fourth largest super merger in pharmaceutical history, and indirectly promoting its cooperation with Dragonfly.

Looking at it today, the deal between Bristol-Myers Squibb and Dragonfly is still heavy enough.

In the eyes of the outside world, the BD involved in the participation of a large pharmaceutical company of Bristol-Myers Squibb will not be too bad. Because they have been through a lot of battles, their vision is also more demanding. Think about it, which of the "medicine kings" that are now on the world's best-selling list, such as K medicine, O drug, and Humira, is not bought by a big pharma?

What's more, the total transaction value of $50 billion and the down payment of $4 million tell us that Bristol-Myers Squibb should be full of expectations for this transaction.

Let's start with the total transaction value.

$50 billion, all at the top of the global license in list. In 2020, the highest license in amount was AstraZeneca's $60 billion acquisition of the first Sankyo TROP2 ADC drug, and this deal followed.

Even in today's China, this is a very large-scale BD transaction, which can be said to be the ceiling of domestic innovative drug licenses.

The record of Chinese innovative drug BD going overseas is still being updated, but the latest record was set by Akeso Biologics at the end of 2022, with a total amount of up to 50 billion US dollars.

Let's look at the down payment.

This is a "touchstone" for BD transactions of pharmaceutical companies, which can reflect the "sincerity" of pharmaceutical companies to a certain extent. For example, in 2019, AstraZeneca introduced Daiichi Sankyo's DS-13 with a down payment of US$5.55 billion + a potential milestone of US$5.2801 billion, with a down payment accounting for 20%.

In the Bristol-Myers Squibb-Dragonfly deal, the down payment was $4 million. What is this concept? In the 75 global biopharmaceutical license in ranking, $2020 million in down payment ranked ninth.

Moreover, the down payment for this transaction is less than DS-2801, but it is also 10%. At the time of the deal, DF6002 had just received clinical approval from the FDA, while DS-2801 had already emerged and had previously been approved for the third-line treatment of HER2-positive breast cancer.

However, in just over two years, Bristol-Myers Squibb has changed its mind. Even with an upfront investment of $6 million, Bristol-Myers Squibb is determined to return the DF5.

So, why has Britney become Mrs. Niu now, what is going on behind this?

02 

Bristol-Myers Squibb bet on the wrong treasure

Although no products have been approved for marketing since its establishment, Dragonfly's circle of friends is a gathering of big coffee. Merck, AbbVie, Gilead, Bristol-Myers Squibb and many other multinational pharmaceutical companies have signed cooperation agreements with Dragonfly.

Big Pharma favors Dragonfly's multi-specific natural killer (NK) cell therapy platform TriNKET and cytokine CYTOKINE.

Bristol-Myers Squibb was attracted to this platform.

Bristol-Myers Squibb's heavy layout of cytokines is actually not difficult to guess. It is well known that PD-1 ushered in a new era of immunotherapy, but PD-1 monotherapy response rates are low, with only about 20% of patients responding to PD-1. Therefore, everyone is looking for a golden partner who can improve PD-1 response rate.

Cytokines are potential stocks in this area. In theory, IL-12 cytokines are able to heat cold tumors to have a better response rate to PD-1.

Whether it is the biased IL-2 that was previously heavily bet on, or IL-12, the protagonist of this incident, Bristol-Myers Squibb's calculation is to use cytokines to activate immune cells and improve the response rate of its own PD-1 inhibitor Opdivo (O drug).

In preclinical animal models, DF6002 can indeed work synergistically with PD-1 inhibitors to enhance the lethality of PD1 inhibitors. Currently, DF6002 is in Phase I clinical development, and its dose-escalation study trials for monotherapy and combination O drugs are ongoing.

However, there are too many gaps to be crossed between theory and reality.

In essence, new drug development is a "three high" gamble with high cost, high risk and high reward, and no one can predict the final outcome until the drug is finally on the market, not even BD's experienced big pharma.

Although DF6002 performed well in preclinical terms, it was too early and added a bit of risk to this gamble. After weighing the pros and cons, we see that Bristol-Myers Squibb still chose to return the product after investing $6 million. For the reason for the return, it is bluntly said that it is because the clinical performance of DF5 is not good.

In other words, Bristol-Myers Squibb thinks he made the wrong bet.

Previously, the example of biased IL-2 and O drug combination failure is just around the corner, so in clinical trials, Bristol-Myers Squibb observed that the signs were wrong, and it was not surprising to withdraw the stop loss in time.

In fact, the development of the IL-12 did not go well.

AstraZeneca has also developed the IL-12mRNA therapy MEDI1191. However, MEDI1191 combined with PD-L1 is not effective in the treatment of advanced solid tumors, and according to data published by AACR in 2022, only 31 patients with 3 patients receiving combination therapy have partial remission and 10 patients have stable disease. Therefore, on November 2022, 11, AstraZeneca's third quarter report removed MEDI10.

Of course, the fact that it was returned by Bristol-Myers Squibb does not lead to the conclusion that the DF6002 has lost its value. The DF6002 has not yet published clinical results, and Dragonfly has a different view than Bristol-Myers Squibb. It believes that the clinical data of DF6002 is fine, and is still full of confidence in DF6002, and has not given up research and development.

In any case, every move of the world's big pharmaceutical companies has always had the significance of a weather vane. Bristol-Myers Squibb's exit doesn't bode well for Dragonfly and IL-12.

03 

Take a rational look at those blockbuster BD deals

Back in China, with the acceleration of domestic innovative drugs going overseas, heavy BD transactions are frequent. For example, the aforementioned $50 billion deal between Akeso and SUMMIT; Another example is the $93.<> billion deal between Kelun Pharmaceuticals and Merck.

Under this round of license out, BD capabilities have also become a key factor in market recognition of the value of pharmaceutical companies. Those huge numbers continue to stimulate the sensitive nerves of investors, and along with them, the rising stock prices of these companies are constantly rising.

It's not hard to understand. People are increasingly realizing that for Biotech, the realization of commercial value of innovative drugs does not have to wait until the product is launched, and the overseas rights and interests of phase I and phase II clinical projects can be transferred to big pharmaceutical companies through internationalization, which can also create value in stages.

This essence is the trade-off between the BD team of the pharmaceutical company balancing clinical progress and product value. If you are lucky, such as the cart therapy of legendary biology, the bispecific antibody of Akeso Biologics, and the ADC of Kelun Pharmaceutical, etc., basically a down payment can recover the R&D expenses invested in the project; Conversely, without lincense out, Biotech's returns are much slower.

That's right, Bristol-Myers Squibb's return is a reminder not to be blindly optimistic about those blockbuster BD deals.

The reality is that for biotech, closing a deal and getting a down payment is just a phased result of BD. In the future, the drug research and development and commercialization capabilities of pharmaceutical companies will continue to be tested. But if one of the links falls off the chain, the once heavy BD transaction will face the risk of zeroing, and the company's revenue and market expectations will be affected accordingly.

Fate, a pioneer in the field of IPSC, is a living example. Given the potential of the IPSC space, Johnson & Johnson agreed with Fate for up to $2020 billion in April 4.

But after Johnson & Johnson and Fate terminated their partnership in January, expectations of a $1 billion deal disappeared in an instant. At the same time, Fate, who lost its thigh support, once plunged 30% in its shares. In order to survive, Fate had to cut pipelines and lay off employees.

In the past year, Big Pharma has partnered with Biotech halfway through and broken up quite a few examples. For example, Eli Lilly returned the rights and interests of Cindilimab to Innovent Biologics; Sanofi returned worldwide rights to the SHP-2 inhibitor RMC-4630 to Revolution.

Therefore, we need to look at those heavy BD transactions with a more rational eye. After all, nine dead lives are the true face of innovative drug research and development.

BD is used wisely to get cash, global markets, and cutting-edge drug development. However, in addition to BD capabilities, there are many dimensions for evaluating a pharmaceutical company, such as whether the pharmaceutical company has core technologies, core barriers, clinical research and development capabilities, and whether commercialization capabilities are strong.

Through multi-dimensional comprehensive judgment, we can more rationally measure the value of a pharmaceutical company.