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Otsuka to acquire Avanir for $3.5 billion
January 2015
by Jeffrey Bouley  |  Email the author
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TOKYO—Early December saw the announcement that Otsuka Pharmaceutical Co. Ltd. would acquire Aliso Viejo, Calif.-based Avanir Pharmaceuticals Inc. for $17 per share in cash, which values Avanir at approximately $3.5 billion.
 
Otsuka noted that Avanir’s pipeline includes programs in Alzheimer’s disease, Parkinson’s disease, migraine and other central nervous system (CNS) indications, and made a point of highlighting a promising new chemical entity, AVP-786, which has a target indication for agitation associated with Alzheimer’s disease and which is preparing to enter Phase 3 clinical trials.
 
Avanir is a biopharmaceutical company specializing in CNS diseases that was founded in 1988. It now employs approximately 500 people and developed and launched Nuedexta (dextromethorphan hydrobromide/quinidine sulfate) capsules in the United States in February 2011 as the world’s first and only approved treatment for the neurologic disease pseudobulbar affect (PBA). Sales of Nuedexta in the 12-month period from July 2013 through June 2014 were $94 million, a 50-percent increase over the prior-year period, Otsuka notes.
 
Nuedexta, having been created to treat the under-recognized neurologic disease PBA, is one of “three distinct values” Otsuka cited as reasons for acquiring the Southern California biopharma, the second being the late-stage investigational compound AVP-786 and the third being Avanir’s clinical development and commercial expertise in neurologic diseases, which are said to complement Otsuka’s capabilities in psychiatric diseases.
 
“These will accelerate Otsuka’s existing expansion strategy in the neurologic area, widening the overall CNS portfolio, inclusive of the psychiatric and neurologic areas, supporting both short-and medium-term growth,” Otsuka noted of the acquisition.
 
“As we bring together Otsuka’s experience and business track record in the area of mental illnesses with Avanir’s strengths in neurologic diseases, we believe that we can evolve into a truly global CNS pharmaceutical company,” according to Taro Iwamoto, Otsuka’s president and representative director. “Avanir’s creativity and proven execution on drug discovery and development for largely unexplored medical indications, typified by PBA, represents a hand-in-glove fit with Otsuka’s culture. We admire and respect Avanir’s innovative vision and execution and want to continue to grow together.”
 
Though not yet an approved and marketed therapeutic, AVP-786 is a strong draw, Iwamoto has noted, because as many as half of patients with Alzheimer’s disease experience agitation, which can manifest as verbal abuse, confusion and aggression. Dementia-related behavioral symptoms, agitation among them, not only make the disease more distressing to the people suffering from it, but they also increase burdens on family and other caregivers—these behavioral disturbances also have been associated with more rapid cognitive decline and institutionalization.
 
Avanir has continued to advance a clinical program for the treatment of agitation in Alzheimer’s disease, a complication which currently lacks any effective and safe treatment, Otsuka notes. Avanir presented Phase 2 proof-of-concept trial results at the American Neurological Association annual meeting in October 2014, and the company expects to meet with the U.S. Food and Drug Administration in early 2015 to discuss advancement of the program.
 
Otuska has also cited its respect for Avanir's “creativity and proof through execution” with regard to Nuedexta, noting that Avanir successfully took on the challenge to create, develop and commercialize a drug in a new disease category for which no approved treatment existed, an approach and level of creativity described as “remarkably consistent with Otsuka’s.”
 
“I am extremely excited to see these two organizations come together to create a leading CNS company. Otsuka is a clear leader in psychiatry and Avanir in neurology; together, I believe our organizations will be able to more rapidly develop and commercialize needed medications to potentially help millions of patients around the world,” said Keith A. Katkin, president and CEO of Avanir.
 
He and his company also noted in their news release about the acquisition that Otsuka “has created numerous innovation seeds through its horizontal alliances in the CNS field with other companies: Lundbeck and BMS on psychiatric therapies, and IBM and Proteus Digital Health on digital solutions for patients, their families, healthcare providers and other caregivers.”
 
The timing of the Avanir deal, some market watchers suggest, may have a lot to do with heading off a tumble over the edge of a patent cliff in April 2015, when Otsuka’s U.S. patent for the drug Abilify—used to treat schizophrenia, bipolar disorder and depression—expires and the company has to face generic competition. Avanir offers at least one path toward bolstering the pipeline with patent-protected products. Otsuka also bought U.S.-based oncology therapeutics company Astex Pharmaceuticals Inc. in 2013 for about $886 million, presumably also in part to beef up the pipeline before Abilify lost patent protection.
 
The acquisition has been unanimously approved by the boards of directors of both companies. The closing of the tender offer will be subject to the tender of a majority of Avanir’s shares outstanding and certain other customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction is expected to close in the first quarter of 2015.
 
Upon close of the transaction, Avanir will continue to operate under its current structure as an independent subsidiary of Otsuka America Inc. Avanir will partner with Otsuka in the United States to further enhance its development and commercialization efforts in CNS-related disorders.
 
Code: E011516

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