Dalbavancin Sale to Actavis

When Pfizer bought dalbavancin and anidulofungin from Vicuron in 2005, it shelled out USD 1.9 billion for both Phase 3 drugs.  One can argue whether each drugs had the same commercial value for Pfizer but it is safe to assume that dalbavancin was valued at approx. USD 1 billion at least.

Now Actavis bought Durata and its sole asset, dalbavancin/Dalvance, now an approved drug for a mere USD 675 mio.  With QIDP status and a 5-year patent extension the drug still has patent protection in the US until 2028 [1].  Also, the need for a long-acting vancomycin replacement has not lost attractiveness over the years.   So, at first glance, it may look like Durata sold for quite a bit under value.

Neither the deal structure Durata had with Pfizer nor COGs can explain the low auction price.  From the perspective of a clinician (not a financial analyst), there are some obvious reasons the price tag has dropped off significantly, and it’s not because of the drug per se but the changed market environment:

  • Oritavancin/Orbactiv development has caught up nicely with dalbavancin and the drugs were approved almost simultaneously this year. Hence, there is now a true competitor in the market.  Compared to 2007 when dalbavancin could have hit the market as a unique product, it is now launched under less favorable circumstances.
  • Oritavancin’s one-time only dosing scheme is simpler and cleaner than the split dosing required for dalbavancin. FDA Ad Board members were concerned about patients not getting their 2nd dose, an issue for dalbavancin but not for oritavancin.  By my standards, we could forget about the 2nd dose of dalbavancin as it adds nothing from a PK/PD perspective, but that’s not the approved label.
  • Pricing for dalbavancin was set at USD 1490 for the 500 mg dose. Hence, a regular treatment course costs approx. USD 4500, i.e., significantly more than oritavancin which has a charge of USD 2900 for a single shot [2].   Again, by omitting the 2nd dalbavancin dose, the price difference disappears.

FDA had some concerns about LFT abnormalities; however, the jury is still out on this.  Once a few million patients have been treated, we should learn from the AERS system whether this is really of concern.  So far there is no reason to believe that dalbavancin’s efficacy and safety profile had anything to do with the low valuation.

The perception about dalbavancin and its commercial prospects has clearly changed.  At 66% above stock value, dalbavancin was not sold to Actavis for a pittance but at a downward corrected value due to changed times.

This is still much of an uphill battle for Actavis.  They will have their work cut out to even at this bargain price.  As David Shaes wrote in a recent blog, Actavis is a newcomer to the antibiotic field and not all that experienced[3].  They have recently acquired several antibiotics and have some tough portfolio decisions now.  Maybe they felt that dalbavancin was a ‘low hanging fruit’ opportunistic investment they did not want to pass up.

Unlike in 2005, there obviously was not much competition to drive the acquisition price up higher.

References:

[1] http://www.otcmarkets.com/edgar/GetFilingPdf?FilingID=9855751
[2] JAMA Drugs for MRSA Skin and Soft-Tissue Infections   2014 Volume 312, 1583
[3] D. Shlaes.  Blog dated Oct 29, 2014 at http://antibiotics-theperfectstorm.blogspot.com

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