Date: 2016-08-09
Type of information: Commercialisation agreement
Compound: Ruconest® - Rhucin® in non-European territories (conestat alfa - recombinant human C1 inhibitor)
Company: Pharming (The Netherlands) Salix Pharmaceuticals (USA - NC) Valeant Pharmaceuticals (Canada)
Therapeutic area: Rare diseases - Genetic diseases
Type agreement: commercialisation
Action mechanism: enzyme inhibitor. Ruconest® (conestat alfa) is a human recombinant C1-esterase inhibitor purified from the milk of transgenic rabbits. Hereditary angioedema, which is caused by having insufficient amounts of a C1-esterase inhibitor, affects approximately 6,000 to 10,000 people in the United States. People with HAE can develop rapid swelling of the hands, feet, limbs, face, intestinal tract, or airway. These acute attacks of swelling can occur spontaneously, or can be triggered by stress, surgery or infection. Swelling of the airway is potentially fatal without immediate treatment. Ruconest® is intended to restore the level of functional C1-esterase inhibitor in a patient’s plasma, thereby treating the acute attack of swelling. Ruconest® is an orphan drug designated therapy developed by Pharming, already approved for the treatment of acute Hereditary Angioedema (“HAE”) attacks in patients in the USA and EU. Since the FDA approval of Ruconest® on 16 July, 2014, US net product sales have grown from $0.3m in 2014 to an annualised rate of approximately $25 million at the end of the second quarter of 2016 within the US acute hereditary angioedema market of around $700 million. Recently Ruconest® has also shown good positive data in prophylaxis of HAE, meeting its primary endpoints for both once weekly and twice weekly dosing regimens in a Phase II clinical trial as announced on July 18, 2016. Once approved in this indication, RUCONEST® will be able to enter this additional market, also worth around $700 million. RUCONEST® therefore has the potential to be the only recombinant C1 esterase inhibitor approved to target both the acute market and the HAE prophylaxis market. Valeant acquired the North American license rights to Ruconest® through its acquisition of Salix Pharmaceuticals, on 1 April, 2015. Prior to this, Salix had acquired the rights through its acquisition of Santarus on 3 January, 2014. Pharming originally entered into an agreement with Santarus for development and commercialisation of Ruconest® in the US, Canada and Mexico on 10 September 2010.
Structure of the Deal
Disease: acute attacks of Hereditary Angioedema (HAE)
Details: * On August 9, 2016, Pharming announced that it has entered into a definitive agreement to acquire all North American commercialisation rights to its own product Ruconest® (recombinant human C1 esterase inhibitor), including all rights in the US, Mexico and Canada, from Valeant. Ruconest®. This transaction will accelerate Pharming’s development into a profitable specialty pharmaceutical company with its own independent commercial infrastructure, which will form the foundation for growth in the future. The transaction has already completed pre-notification and clearance procedures under the Hart-Scott-Rodino Antitrust Improvements Act 1976.
To ensure a seamless transition, Pharming is anticipating that Valeant’s dedicated Ruconest® sales force, a total of 11 people, will accept offers to join Pharming to continue the Ruconest® sales effort in the USA. The Company also plans to increase the size of the sales force to drive growth in product sales, together with increased investments in medical science liaison personnel and additional marketing activities, including patient advocacy programmes and the provision of significant unconditional support for the HAEA (the US HAE patients association) and its programmes as well as other HAE centers of excellence in the USA. In addition, Pharming is planning further investment in the acceleration of Ruconest® sales efforts to drive growth in the EU, Middle East and Africa markets which Pharming will take over in October from SOBI, as announced on 14 July 2016, and to make Ruconest® available in Canada and Mexico.
Valeant and Pharming will work closely on the transition for customers and HAE patients under a transition services agreement entered into at the same time as the transaction. This will enable Pharming to replace core functions currently undertaken by Valeant and its contractors in a timely manner.
Financial terms: Under the terms of the agreement, Pharming will pay Valeant an upfront fee of $60 million upon Closing, which is expected during the fourth quarter this year. In addition, over the coming years the Company will make one-time-only payments to Valeant on achievement of a small number of specific sales milestones events, totalling a maximum of US$65 million. The specific details of these self-funding additional transaction terms are not disclosed for commercial reasons. The transaction is subject to Pharming obtaining adequate financing. Pharming will carry out a financing round to obtain sufficient new equity capital and debt finance over the coming weeks prior to closing. The transaction will be funded by a combination of additional straight debt and new equity or equity-linked securities totaling approximately $80-100 million. Pharming has engaged Roth Capital Partners and Stifel Nicolaus Europe to act as placement agents in order to raise capital over the coming weeks (the “Offering”). The final terms of the Offering will depend on market and other conditions at the time of pricing. The debt facility is expected to be on typical commercial terms. Management believes this combination represents excellent value for shareholders.
Pharming anticipates that this transaction, after taking full account of the costs of the transaction and the financing including interest, will be accretive to earnings within 2016 and will enable the Company to reach profitability potentially as much as three years earlier than under the Valeant license.
Latest news: * On November 4, 2014, Pharming Group announced the receipt of a $20 million milestone payment from Salix Pharmaceuticals. The milestone was paid according to the terms and conditions of the Ruconest® commercialization agreement between Salix and Pharming. Sijmen de Vries, Pharming CEO, commented, “The US launch of Ruconest®, as announced yesterday, and the receipt of the US$20 million milestone from Salix, mark what we perceive as the beginning of a new era for Pharming. The receipt of this milestone payment strengthens our debt-free balance sheet to more than €38 million as of today. From this solid basis, as result of future receipts of 30% of US net sales, up to $100 million annual sales, increasing stepwise up to 40% for annual US sales in excess of US$100 million for the supply of Ruconest® to Salix and in addition growing revenues from EU sales, both from our own direct commercialization and by Sobi, we are now aiming for our goal of achieving financial sustainability of the Company.
