Health

Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Earlier this year, AbbVie won an intense bidding war for Pharmacyclics, paying $21 billion for the company and the right to split sales of its potential blockbuster blood-cancer drug Imbruvica with Johnson & Johnson. AstraZeneca may have just done AbbVie one better.

With the purchase of 55 percent of Acerta Pharma for $4 billion -- with an option to take over the entire firm for about $3 billion -- AstraZeneca gets a cancer drug, acalabrutinib, that could compete directly with Imbruvica. A $7 billion outlay may not sound cheap, but compared to AbbVie's deal, AstraZeneca's is frugal. 

For now, investors may be more focused on the fact that AstraZeneca is committed to expensive trials through at least 2017 before it sees any sales. Its shares were down 1 percent on Thursday afternoon.

Shareholder Shrug
AstraZeneca investors haven't responded to what seems like a good deal for Acerta
Source: Bloomberg
Intraday times are displayed in ET.

Acerta reported promising results from mid-phase trials of its drug last week, suggesting it may be even more effective than Imbruvica in treating relapsed chronic lymphocytic leukemia (CLL), with fewer side effects. The drug showed a 95 percent response rate (meaning the percentage of patients whose cancer shrinks or vanishes), compared to 58 percent for Imbruvica. AstraZeneca predicts peak sales of about $5 billion, compared to the $10 billion AbbVie projects for Imbruvica. 

A core part of AbbVie and J&J's strategy for getting Imbruvica from around $1 billion in sales expected this yearto $10 billion is to dramatically expand the number of cancers and other diseases it's approved to treat, and to test it in combination with other cancer drugs. Right now, it's FDA approved for two types of blood cancer as a second therapy if the first effort fails.

AbbVie and J&J want to get it approved as a first-choice medicine in CLL, to start. The chance of that approval was bolstered by data released earlier this month at the annual meeting of the American Society for Hematology.

High Hopes
Imbruvica has blockbuster potential. Note that this is only half of sales, the other half goes to J&J.
Source: Bloomberg

AstraZeneca will likely follow a similar strategy, and its drug is already in early trials in solid tumors. Imbruvica's owners are also testing that drug in solid tumors. 

There are risks to the deal. As promising as last week's results were, approval and sales forecasts are never quite certain for a drug that hasn't completed late-phase trials. Ask Clovis Oncology investors about that. Other firms including Eli Lilly are working on similar drugs. AbbVie will likely put a lot of resources into making Imbruvica work, to justify its own expensive deal and in hopes of replacing some of the sales it will lose when its best-selling anti-inflammation drug Humira faces generic competition, possibly as soon as 2017. AbbVie and J&J have a three-year head start on approvals and studies for their drug. 

But when there are two substitutable drugs, increasingly large and powerful pharmacy benefit managers and insurers are able to negotiate significant discounts on even very highly priced drugs. If AstraZeneca's drug gets to market, it's almost certain to take a hunk of Imbruvica's sales. If acalabrutinib continues to show similar or better effectiveness with less of the bleeding, rashes, and diarrhea sometimes caused by Imbruvica, AstraZeneca's forecast may end up being on the conservative side, which would be bad news for AbbVie in particular.  

J&J still has the last, hearty laugh: It bought a 50 percent stake in Imbruvica at a very early stage of its development for just $150 million. Still, though no bet in pharmaceuticals is a sure thing, AstraZeneca's looks like a pretty solid one. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Max Nisen in New York at mnisen@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net