Baxter to buy two drugs from Sigma-Tau Finanziaria of Italy for $900 mn

Baxter International Inc has agreed to acquire two drugs to treat a rare form of blood cancer from Italian drugmaker Sigma-Tau Finanziaria SpA for $900 million, before expenses.

Both the drugs are biologics to treat acute lymphoblastic leukemia (ALL) and would become part of Baxter's biopharmaceutical business Baxalta, which is likely to be spun off this year.

Of the two drugs, Oncaspar is approved for sale in the US, Germany and Poland with annual sales of $100 million, Baxter said yesterday. The other drug is currently in the trial stage.

ALL has been classified as a rare disease by the US FDA and according to the American Cancer Society's estimates about 6,250 new cases of ALL would be diagnosed in 2015.

Drugmakers are increasingly seeking to develop treatments for rare diseases given the high premiums and high premiums for developers and exceptionally high prices with little resistance from the limited number of patients.

Biologics, made from living cells, come with heavy price tags thanks to safer profiles and stronger efficacy than typical treatments for cancers and immunological diseases.

The deal would close in the third quarter and add to its adjusted profit on a cash basis in the first full year after that.

Meanwhile, Baxter, which focuses on rare and orphan drugs, said in a statement the deal would enable it to gain the leading marketed biologic treatment Oncaspar, the investigational biologic calaspargase pegol, and an established oncology infrastructure with clinical and sales resources.

The Oncaspar transaction is expected to close in the third quarter. By mid-year, Baxter expects to establish the BioScience business as a separate, publicly traded, innovation-oriented biopharmaceutical company, Baxalta Incorporated.

Oncaspar is a first-line biologic used as part of a multi-agent chemotherapy regimen to treat ALL. It is currently marketed in the US, Germany, Poland and certain other countries and has approximately $100 million in annual sales. ALL is a rapidly progressing cancer of the white blood cells responsible for more than 80 per cent of childhood leukemia cases.

"The Baxter BioScience legacy of delivering solutions for orphan diseases and small patient populations and our global presence positions us well to accelerate the growth of the Oncaspar portfolio globally," said Ludwig Hantson, Ph.D., president of Baxter BioScience. "With Oncaspar, Baxalta will bring an established standard of care therapy to more patients worldwide through the pursuit of additional indications and regulatory approvals across the globe."

"Oncaspar is a strong strategic fit for our rapidly expanding oncology business, as it complements our R&D programs in hematologic cancers," added David Meek, head of oncology for Baxter BioScience. "The acquisition provides an immediate commercial footprint in the United States and Europe with a heritage of expertise in treating this challenging disease."

In addition to the currently marketed formulation of Oncaspar, Baxter BioScience intends to continue the development of a lyophilized formulation, which is being investigated to enhance product stability to support product supply continuity.

As part of the acquisition, Baxter BioScience is also acquiring a related new chemical entity calaspargase pegol, a biologic in development for the treatment of ALL, with an increased shelf life that is expected to reduce dosing frequency.

Further, the company plans to investigate Oncaspar for potential new indications, including in additional ALL patient populations with significant unmet needs, as well as for acute myeloid leukemia (AML).

"We are confident that this transaction provides benefits for patients, our business and our employees. The Oncaspar team will gain beneficial resources by joining forces with Baxter BioScience to bring this valuable treatment to more patients around the world," said Andrea Montevecchi, CEO of Sigma Tau Finanziaria SpA.

The acquisition is expected to accelerate the company's efforts to capitalise on the rapidly growing oncology market, with an estimated $10 billion total market potential across current oncology indications for Baxter's pipeline assets.

It also complements recent momentum on several partnerships within the oncology pipeline, including positive Phase III results for the investigational treatment pacritinib for myelofibrosis as well as the recent regulatory filings of MM-398 for metastatic pancreatic cancer.

Under the terms of the agreement, Baxter will purchase the portfolio for $900 million before working capital and other transaction adjustments. The company expects to finance the transaction through a combination of foreign cash and debt.

This transaction is expected to be accretive to adjusted earnings on a cash basis in the first full year and increasingly accretive thereafter. The closing of the transaction, expected in the third quarter, is subject to regulatory approvals and other customary closing conditions.

Baxalta Incorporated will host an investor conference on Tuesday, 19 May, during which the company's leadership will address the growing oncology business, strategy and emerging pipeline.