The Toronto Stock Exchange is set to lose its most valuable Canadian biotechnology company after pharma giant Pfizer Inc. said Monday it would buy Trillium Therapeutics Inc. in a deal valuing the Mississauga blood cancer drug developer at US$2.26-billion.
Pfizer said it will pay US$18.50 a share – more than triple Trillium’s US$6.09 closing price on Friday – for all shares of Trillium that it does not already own. Pfizer invested US$25-million last year in Trillium, picking up 2.3 million shares for US$10.88 apiece. It’s the second-largest deal for a Canadian biotech company on record, after Shire Pharmaceuticals Group PLC’s $5.9-billion CAD purchase of AIDS drug developer BioChem Pharma Inc. 20 years ago.
The all-cash deal requires the support of two-thirds of Trillium investors and will be completed via a plan of arrangement in British Columbia, where Trillium is officially domiciled.
The takeover follows a decision last month by lupus drug developer Aurinia Pharmaceuticals Inc., previously the TSX’s most valuable biotechnology company, to leave the senior Canadian exchange in favour of a Nasdaq-only listing. That was the latest in an exodus of dual-listed, Canadian-based, early-stage life sciences companies from their home exchange for U.S. listings. Canada’s most valuable biotech companies, including AbCellera Biologics Inc and Zymeworks Inc., are all listed exclusively on U.S. exchanges, where investor activity in the sector is heavily concentrated.
Like many biotech stocks, particularly those based in Canada, Trillium has seen its share value slide sharply this year; it touched a 52-week low on Friday, down nearly 60 per cent in 2021. That followed a massive runup in biotech stock values last year, which had muted mergers and acquisitions activity in the sector given that it had made buyout targets more expensive, said David Martin, an analyst with Bloom Burton in Toronto.
However, valuations are now more appealing to acquirers after this year’s sell-off, he added. “Trillium has a drug that is potentially class leading” and its share price was down steeply, said Mr. Martin, who had a US$20 target on the stock. “They became a good target because of that.”
Trillium stock (TRIL-T) soared $14.41, or 184.5 per cent, to close at $22.22 on Monday. News of the deal helped push up valuations of several other Canadian-based biotech stocks Monday. “A 200 per cent premium acquisition of a down and out mid-small cap is EXACTLY what biotech needed. More please!” Brad Loncar, a U.S. life sciences fund manager, said in a tweet after news of the deal.
Trillium, originally called Neurogenic Biotech Corp. when it was founded in 2004, was one of a handful of Canadian-based biotechs that had surpassed valuations of US$1-billion in the past two years, fuelled by growing international investor interest in Canada’s small but teeming crop of drug developers. The company went public through a reverse takeover of a shell company on the TSX in 2013 and listed on the Nasdaq a year later. Its stock drifted to less than 50 US cents in 2019, but Trillium’s fortunes reversed sharply after the arrival of Cambridge, Mass.-based industry veteran Jan Skvarka as chief executive officer in September, 2019, bringing greater profile to the company.
Pfizer is one of the world’s most valuable pharmaceutical companies and has become a household name in the past year because of its COVID-19 vaccine (developed with BioNTech), which has also bulked up the U.S. company’s coffers. But Pfizer is also a diversified developer and marketer of drugs for pain management, cardiovascular and central nervous system diseases and cancer.
Andy Schmeltz, global president and general manager of Pfizer’s oncology group, told analysts during a conference call Monday the Trillium deal met all three of Pfizer’s goals when it makes acquisitions: to create “meaningful” shareholder value by deploying capital; by making deals in therapeutic areas where it already has a presence; and adding “flagship medicines” that enable it to build leadership in priority areas.
He said Trillium’s products “offer the potential to contribute blockbuster revenues in the critical 2026 to 2030 time frame” for Pfizer when its patents on top-selling drugs Prevnar 13, Eliquis and Xtandi expire, which analysts expect will result in billions of dollars in lost sales.
With Trillium, Pfizer is gaining access to two drug candidates, known as TTI-622 and TTI-621, designed to fight tumours by blocking the “don’t eat me” signals that are sent by the cancerous growth to the immune system, and stimulating the body to attack the cancerous growths.
So far, TTI-622 has been well tolerated by human subjects in its continuing safety trial involving 43 patients, while TTI-621 has shown efficacy in a continuing study of 30 patients, Pfizer said. Both drugs must successfully complete trials showing they work as intended on cancer patients before gaining regulatory approvals that allow them to be sold, a process expected to last several years.
Chris Boshoff, Pfizer’s chief development officer, oncology, said on the conference call that his company was encouraged by the early clinical data for TTI-622 and TTI-621 for patients with heavily pretreated lymphoid malignancies and early encouraging activity for TTI-622 in patients with multiple myeloma. He added that the way the drugs work establish a second effective form of cancer immunotherapy, following the development of a class of drugs known as PD-1 and PD-L1 blockers.
Mr. Shmeltz said the Trillium drugs have the potential to be “best in class,” working either on their own or in combination with other drugs, “inducing deep and lasting responses across a range of blood cancers while being quite tolerable for patients.
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