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Filings Reveal Concert Pharma (CNCE) Spurned $250 Million Buyout Offer From Vertex (VRTX) in November 2016

3/26/2017 8:36:39 PM

Filings Reveal Concert Pharma Spurned $250 Million Buyout Offer From Vertex in November 2016 March 27, 2017
By Mark Terry, Breaking News Staff

As announced on March 6, Boston-based Vertex Pharmaceuticals (VRTX) acquired Concert Pharmaceuticals (CNCE)’ cystic fibrosis (CF) drug candidate CTP-656. More recent filings with the U.S. Securities and Exchange Commission (SEC) provide more details and background.

In November 2016, Vertex made a $250 million offer to acquire Concert. However, Concert turned the deal down. On November 16, Vertex proposed a non-binding offer to buy all of Concert’s outstanding shares for $11.50 each, which would have totaled about $257 million.

Two days later, Concert’s board of directors met and rejected the deal, indicating it “substantially undervalued the company as a whole.” However, the board also discussed the possibility of a more specific, limited deal involving CTP-656. The two companies then spent the interim months negotiating the terms, finally settling on Concert receiving $160 million upfront and $90 million in possible milestone payments.

The SEC filings also show that Vertex expressed interest in CTP-656 as early as March 2016.

CTP-656 is an investigational CF transmembrane conductance regulator (CFTR) potentiator. It is being developed as part of a once-daily combination regimen of CFTR modulators. CTP-656 is essentially the same drug as Vertex’s Kalydeco. The difference is that hydrogen atoms are replaced by deuterium atoms. This makes it last longer. CF patients take Kalydeco twice daily. Concert’s data indicates that CTP-656 could be taken once a day. Deuterium, known as “heavy hydrogen” is a stable isotope of hydrogen.

Vertex plans to combine CTP-656 with tezacafator so that patients would only take one per day. Currently, Vertex has a combination of tezacaftor and Kalydeco in a late-stage clinical trial for a single tablet in the morning, but would also require a second dose of Kalydeco at night. In late 2016, Concert launched a Phase II trial of CTP-656. Once this deal closes, Vertex will take over the trial and handle all future drug development activities.
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The Boston Business Journal writes, “For Concert, the deal appears to remove a legal risk. In previous filings, the company has said that Vertex could have sued it for patent infringement if it ever sought marketing approval for CTP-656, due to the drug’s similarities to Kalydeco.”

CF is a rare, life-threatening genetic disease that affects about 75,000 people in North America, Europe and Australia. It is caused by a defective or deleted CFTR protein from mutations in the CFTR gene. In order for children to have CF, they must inherit two defective CFTR genes, one from each parent. There are approximately 2,000 known CFTR gene mutations.

The defective or missing CFTR protein causes poor salt and water flow into and out of the cells in numerous organs, including the lungs. This causes a buildup of thick, sticky mucus that can lead to chronic lung infections and progressive lung damage that eventually leads to death. For a person born with CF, the median predicted age of survival is 41 years. The median age of death, however, is 27 years.

Generally viewed as a miracle drug, Kalydeco is a miracle that comes with a high price tag—about $300,000 annually. Kalydeco is the first drug to affect the underlying causes of CF rather than its symptoms. It’s only useful for a subset of CF patients, ones that have a specific mutation, which means a patient size of about 2,000 people. Which, despite the many ethical and moral questions it raises, explains the high cost.

It also explains at least some of the interest in CTP-656 for people outside the company. If approved, it’s possible that, because patients will need to take fewer doses, the overall price of CF treatment may come down.

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