(BFM Bourse) – Once again, the price of the tricolor pharmaceutical group is declining on the announcement of an external growth operation. Ipsen has set its sights on Epizyme and its cancer treatment Tazverik, with an initial price of more than 8 times sales. The acquisition should also weigh on operating income until the end of 2024.
Since Ipsen’s billion-dollar attempt to beef up a treatment portfolio increasingly threatened by generics, with the 2019 takeover of Clementia Pharmaceuticals, the pharmaceutical group has struggled to convince the market of the merits of of its external growth projects.
In 2019, Ipsen had to give up most of the amount of the takeover of Clementia the year following the operation after the appearance of side effects during clinical trials. The extent of the destruction of value thus gave reasons for the initial reluctance of the market (the Ipsen share had lost 6.54% on the day of the announcement of the acquisition of Clementia… and 50% over the following twelve months ).
At the end of 2021, the group unveiled its largest investment since Clementia, this time tapping into the pool of French biotechs in order to replenish its portfolio. By signing with Genfit, Ipsen has acquired worldwide rights (excluding China, Hong Kong, Taiwan and Macao) to the molecule elafibranor as a treatment for a rare liver disease, primary biliary cholangitis (PBC) in the final stage of clinical tests. In return, Ipsen made an initial payment of 120 million euros in favor of the Lille biotech, the agreement providing for additional milestone payments of up to 360 million euros (i.e. up to 480 million euros in total). There too, the reception had been mixed, since the title Ipsen had lost 8.05% the day of the announcement and another 7.36% the next day.
A takeover bid with a premium of 144%
This Monday, Ipsen’s share price declined by 2.33% to 85.85 euros around 2:30 p.m. as the lab unveiled its plan to acquire (by the third quarter subject to conditions precedent) the American biotech Epizyme. The acquisition focuses on Epizyme’s lead drug, Tazverik (tazemetostat), an EZH2 inhibitor (“Enhancer of zest homolog 2”, an enzyme that appears to block the genetic response against tumor development) without chemotherapy. This first representative of a new therapeutic category obtained the approval of the American authorities within the framework of an accelerated procedure in 2020. In the basket Epizyme also brings the EZM0414, composed currently in the initial phases of clinical trials, as well as a portfolio of preclinical programs focused on epigenetic targets.
“Through this agreement, we will grow our oncology assets. Ipsen’s capabilities and resources, combined with those of Epizyme, will accelerate Tazverik’s growth to reach its full potential for patients with follicular lymphoma. Available data support the positioning of the Tazverik in both follicular lymphoma patients with an EZH2 mutation and non-mutated follicular lymphoma,” said David Loew, Chief Executive Officer of Ipsen. “We are convinced of the potential of its efficacy and safety profile, in particular for older and/or more fragile patients, who are treated in a community setting. In addition, we are delighted to integrate new expertise in epigenetics and SETD2 inhibitor, as well as several other preclinical assets to our portfolio.”
Under the terms of the agreement and the merger plan, Ipsen will launch a tender offer to acquire all of the shares of Epizyme on Nasdaq at a price of 1.45 dollars per share in cash (a comfortable premium of 144% compared to the last 30 sessions), for an initial total amount estimated at 247 million dollars, compared to net sales for Tazverik of 30.9 million dollars last year in the United States.
No need for a new fundraiser
In addition, Epizyme shareholders will receive a Guaranteed Value Certificate (CVG) per share sold. Each CVG will be entitled to a deferred payment of $0.30 per CVG if Tazverik’s sales reach the $250 million milestone in four consecutive quarters by December 31, 2026 and a payment of $0.70 per CVG payable upon confirmation of regulatory approval from U.S. authorities necessary to market and sell Tazverik in combination with R² (rituximab and lenalidomide) in second-line follicular lymphoma by January 1, 2028.
The transaction will be entirely financed by Ipsen’s available cash and existing credit lines. While the acquisition of Epizyme will strengthen Ipsen’s commercial infrastructure in the United States, given the current level of R&D expenditure, the transaction should have a “moderate” dilutive effect on the operating result of Ipsen’s activities until at the end of 2024. Recall that before the announcement of its takeover, the American biotech was counting on 160 to 180 million dollars in operating expenses in 2022 (budget revised downwards following the reduction of approximately 12% of its workforce).
The dilutive effect on the operating margin of Ipsen’s activities in 2022 will however be limited, simply given the expected schedule for the finalization of this transaction.
Guillaume Bayre – ©2022 BFM Bourse
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