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Allergan Buys NASH Therapy Maker Tobira at Huge Premium


Allergan plc AGN announced a definitive deal to acquire Tobira Therapeutics, Inc. TBRA for a total potential consideration of around $1.7 billion.

Tobira is a clinical-stage biotechnology company focused on making drugs to treat non-alcoholic steatohepatitis (NASH) and other liver diseases.



What is Allergan Paying?

The acquisition comes at a steep price. Allergan will pay $28.35 per share upfront for all the outstanding shares of Tobira common stock, plus one Contingent Value Right (CVR) to receive up to $49.84 per share in future payments, based on the successful completion of certain development, regulatory and commercial milestones related to Tobira’s lead pipeline candidates.

The upfront payment of $28.35 alone represents a stunning premium of around 500% to Tobira’s Monday’s closing price of $4.74. Shares of Tobira rose more than 700% after the acquisition was announced.

Is the Massive Premium Justified?

The acquisition will add global rights to Tobira’s lead pipeline candidates Cenicriviroc (CVC) and Evogliptin, thereby expanding Allergan’s gastroenterology pipeline.

Incidentally, CVC and Evogliptin are highly differentiated compounds, which are being developed to treat the multi-factorial elements of NASH, including inflammation, metabolic syndromes and fibrosis thereby reinforcing Allergan’s commitment to the NASH space.

Notably, NASH, a severe type of liver disease, occurs when the accumulation of liver fat is accompanied by inflammation and cellular damage, leading to liver fibrosis, and eventually cirrhosis, liver cancer or liver failure. At present, no approved therapies are available for patients suffering from NASH. According to the company’s press release, NASH is the fastest growing cause of liver cancer and liver transplant in the U.S., thus representing significant unmet need.

CVC is a first-in-class oral CCR2/5 phase III inhibitor impacting liver inflammation and fibrosis. The candidate demonstrated a clinically and statistically significant improvement in fibrosis of at least one stage without worsening NASH after one year of treatment – one of the two secondary endpoints – in the phase IIb CENTAUR study.

However, we remind investors that CVC failed to meet the primary endpoint of a two-point reduction in the NAFLD Activity Score as well as the second secondary endpoint in the CENTAUR study. Results from CENTAUR were announced in July.

The other candidate, Evogliptin is in a phase I study which is evaluating the oral DPP-4 (Dipeptidyl peptidase-4) inhibitor as a potential treatment for NASH in combination with CVC impacting the metabolic element of the disease.

While ultimately the NASH market holds great potential, Allergan’s generosity has raised some eyebrows, which is reflected in the 2.5% decline in the company’s shares on Tuesday.

The transaction is expected to close by the end of the year, if the necessary approvals are obtained. The boards of directors of both the companies have approved the merger.

Also Buys Akarna Therapeutics

On the same day, Allergan also announced that it has bought privately held Akarna Therapeutics for $50M in upfront cash plus unspecified milestones. Its lead product candidate AKN-083, a preclinical-stage FXR agonist, is also being evaluated for the treatment of NASH – thus making the acquisition highly complementary to the Tobira buyout.

Allergan joins Gilead Sciences Inc. GILD and Intercept Pharmaceuticals, Inc. ICPT which are also developing therapies for the treatment of NASH.

Allergan, one of the largest and fastest growing drugmakers, has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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