Allergan Repeatedly Revised Bid for Tobira Before Sealing Deal

  • Startup drugmakers get premiums as big pharma seeks products
  • Allergan gains experimental treatment for liver disease

Allergan Inc. repeatedly revised and sweetened its offer for Tobira Therapeutics Inc. before sealing a deal to acquire the maker of a potential treatment for liver disease, a sign of the power startup drugmakers have to drive up acquisition prices.

From its starting bid to the final offer, and despite the failure of a trial in between, Allergan raised the value of its offer by $145 million, according to a regulatory filing by the company on Monday. The Tobira acquisition brought Allergan an experimental drug for a liver disease known as NASH, one of biotechnology’s hottest areas with a potentially huge patient population.

On July 5, two weeks after leaders of the two companies met for dinner in New York, Allergan offered $310 million upfront, plus additional payments of up to $1.24 billion if Tobira’s drug succeeded on all metrics in its mid-stage trial, which was ongoing, according to the documents. Then Tobira announced that the drug failed in its primary goal of improvement in a broad measure that includes multiple factors of the disease, but met a secondary goal of improving liver fibrosis without worsening NASH.

Despite the failure, Allergan revised its offer three times more from Aug. 26 through Sept. 6, increasing the upfront payment offer to $450 million, with an addition $950 million in potential milestone payments if certain trial and sales goals were met.

Tobira received a proposal from another potential purchaser and informed Allergan of the competition on Sept 17. Allergan increased its offer twice more to $595 million upfront and $1.1 billion in potential milestone payments, closing a deal on Sept 19.

A spokesman for Allergan declined to comment on the price of the deal. A representative for Tobira declined to comment on the identity of the other bidder.

At its maximum value, the purchase price was a 498 percent premium compared to Tobira’s closing share price the day before the deal. While biotech shares have been hurt by attention to drug pricing, startup drugmakers still command such premiums because big pharma companies like Allergan and Pfizer Inc. are seeking potential new blockbuster products.

Allergan, in particular, has been on a shopping spree for small- and mid-sized assets. Tobira was Allergan’s fourth acquisition in September alone. The drugmaker announced deals for closely-held NASH company Akarna Therapeutics Ltd. on Sept. 20 with an upfront payment of $50 million; Vitae Pharmaceuticals Inc., a maker of dermatology medicines, for $639 million on Sept. 14, and ophthalmology gene-therapy firm RetroSense Therapeutics LLC for $60 million on Sept. 9.

Before it's here, it's on the Bloomberg Terminal.