Allergan buys S.F. drugmaker
Allergan’s agreement to buy San Francisco’s Tobira Therapeutics for as much as $1.7 billion sent biotech stocks soaring Tuesday, as investors bet that buyers will emerge for other companies developing experimental treatments for a severe liver disease.
Nonalcoholic steatohepatitis is a type of fatty liver disease that has become one of the hottest areas in biotech — and Allergan’s 498 percent premium for Tobira just made it even hotter.
Shares of Intercept Pharmaceuticals rose 7 percent, Galectin Therapeutics jumped 14 percent and Conatus Pharmaceuticals soared 17 percent. Even biotech giant Gilead Sciences of Foster City, which has treatments for the disease, got a boost of 3.3 percent.
Allergan, based in Ireland, will pay $28.35 per share in cash initially, and up to $49.84 per share if Tobira hits certain sales and regulatory goals, the company said Tuesday. The lower price values Tobira at about $533 million, almost six times its market capitalization of $89 million — even if the liver drug maker doesn’t hit the goals.
Shares of Tobira jumped more than 720 percent to close at $38.91, while Allergan shares slipped more than 6 percent, closing at $238.67.
Some analysts raised questions about Allergan’s premium for a company that has recently missed a primary target in a mid-stage study. In July, Tobira said its experimental drug missed its main goal of lowering a gauge of disease severity, but that it did lower liver scarring, an important secondary goal.
“Efficacy is not ‘locked in,’ ” Umer Raffat, an analyst at Evercore ISI, wrote in a note to investors.
Last month, Allergan CEO Brent Saunders said the company had changed its approach to deal making after the collapse of its planned $160 billion merger with Pfizer in April ran into regulatory hurdles. With Tobira, Allergan is making its third acquisition in as many weeks. It bought Vitae Pharmaceuticals, a maker of dermatology medicines, for $639 million last week, and ophthalmology gene-therapy firm RetroSense Therapeutics for $60 million in early September.
The moves suggest “other midcap biotechs in these markets may also continue to benefit as a deep-pocketed acquirer appears to want to build a pipeline of clinical stage biotech assets,” said Michael Yee, a biotechnology analyst at RBC Capital Markets. He also noted that Allergan moved on Vitae and Tobira after both stocks had dropped following disappointing data from their studies, offering big premiums.
“What is interesting is Allergan appears to be buying biotech assets that the market views as ‘questionable’ or relatively disappointing,” Yee wrote in a note to investors.
Covington & Burling was Allergan’s lead legal counsel on the Tobira deal. Centerview Partners and Citigroup were Tobira’s financial advisers, while Skadden, Arps, Slate, Meagher & Flom and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian provided legal counsel.