With its $1.5 billion buyout of Celator Pharmaceuticals Inc. to take ownership of Vyxeos for high-risk (secondary) acute myeloid leukemia (AML), Jazz Pharmaceuticals plc is not done exploring the blood cancer space, said CEO Bruce Cozadd. "It's certainly a nice addition, we're very excited about it, but we think there are opportunities beyond this as well, and we intend to remain active," he said. "As a company with good cash flow and a strong balance sheet," the firm aims to explore more therapies in hematology/oncology, sleep and, "if we found a differentiated pain asset, maybe there," he added.

Among the firm's marketed products is Erwinaze (asparaginase) for acute lymphoblastic leukemia.

In the Celator deal, structured as a tender offer and second-step merger, Jazz, of Dublin, agreed to pay $30.25 per share, a 72 percent premium to Ewing, N.J.-based Celator's most recent closing price in order to claim Vyxeos, a liposomal form of cytarabine and daunorubicin that emerged from the latter's Combiplex delivery platform based on liposomes and nanoparticles. A new drug application (NDA) for breakthrough-designated, fast-tracked Vyxeos is expected in the next quarter, with marketing authorization in Europe to be sought in 2017.

Allen Yang, chief of hematology/oncology for Jazz, said during a conference call with investors that Vyxeos takes on the "tragic conundrum" faced by physicians treating older patients with AML. "The induction therapy is quite toxic," he said, and "even worse when someone has a poor prognosis, high-risk AML like the secondary AML, or someone who has myelodysplastic syndrome that progresses to AML." Doctors "are reluctant to treat these patients if they don't die from their disease almost immediately," he said, because with induction therapy "you kill about a quarter of patients and you only get about half of them into remission."

In March, the firm disclosed top-line results of the phase III trial comparing Vyxeos with the standard-of-care 7+3 regimen, which has held sway for 40 years: seven days on regular cytarabine and three days on daunorubicin. Vyxeos was the first to beat the treatment in overall survival (OS). Specifically, the median OS with Vyxeos totaled 9.56 months compared to 5.95 months for patients receiving 7+3, for a 3.61-month improvement in favor of the Celator drug, with a hazard ratio of 0.69 (p=0.005), which means a 31 percent reduction in the risk of death vs. 7+3. Patients alive 12 months after randomization numbered 41.5 percent on the Vyxeos arm compared to 27.6 percent on 7+3 arm. Those alive at 24 months was 31.1 percent on Vyxeos vs. 12.3 percent on 7+3. Vyxeos also turned up a statistically significant improvement in induction response rate (IRR, complete remission [CR] plus complete remission with incomplete blood count recovery of 47.7 percent vs. 33.3 percent, p=0.016) and that held sway for the analysis of CR alone, too (37.3 percent vs. 25.6 percent, p=0.040). Sixty-day all-cause mortality tallied 13.7 percent vs. 21.2 percent, in favor of patients treated with Vyxeos. More details are due at the upcoming American Society of Clinical Oncology meeting in Chicago. (See BioWorld Today, March 16, 2016.)

About 20,000 people in the U.S. are diagnosed with AML annually, and about 8,000 of those are treatable with cytotoxic chemotherapy. About 40 percent of the segment is classified as high-risk patients. That means they have AML with a history of myelodysplastic syndromes (MDS), are newly diagnosed AML patients with an MDS karyotype and/or carry high treatment risk for their AML.

FIGHTING OFF GENERICS

Piper Jaffray analyst David Amsellem noted that the conventional forms of cytarabine and daunorubicin are available as generics, but the formulation of the two molecules in Vyxeos potentially enables treatment in the outpatient setting, which could result in hospitalization cost savings since 7+3, as induction and consolidation, is given on an inpatient basis. Jazz management "suggested that there is a significant likelihood that Vyxeos will be given on an outpatient basis during the consolidation phase," he wrote in a report, and though the firm "did not provide a window into its thinking on Vyxeos pricing, it is safe to say that the extent of this potential pharmacoeconomic benefit will inform how the company plans to price Vyxeos."

Roth Capital Partners analyst Joseph Pantginis, in his report, called the Jazz buyout "a fitting culmination to the Celator story."

CEO Cozadd said it was "a little hard for us to get precise about revenue forecasts" at this point, but he encouraged investors to compare the Celator grab to the Jazz buyout of Villa Guardia, Italy-based Gentium SpA in 2014, a $1 billion transaction that gained the since-approved drug Defitelio (defibrotide) for adults and children who develop hepatic veno-occlusive disease with additional kidney or lung abnormalities after they receive hematopoietic stem cell transplants. (See BioWorld Today, Dec. 23, 2013, and March 31, 2016.)

"In this case [with Celator], we have a larger addressable population," he said, plus a better-known and more developed market. Also, Jazz gets worldwide rights promptly to Vyxeos, whereas the Gentium arrangement first brought a U.S. share of revenues through a royalty, which was later consolidated into a commercial right. Furthermore, "pivotal data [with Vyxeos] and maybe the overall body of scientific evidence are stronger, given the head-to-head comparison in a prospective, randomized study vs. a well-established standard of care."

Last week, as reports circulated that Jazz might be near a high-priced deal with Celator, J.P. Morgan analyst Jessica Fye wrote in a report that she was "not entirely surprised by this given, we suspect, any number of players would have looked [favorably] at a de-risked AML drug with breakthrough status." Jazz has "capacity for additional deals," in her view. "Further, we see very high incremental margins on Vyxeos, particularly with Jazz's ability to leverage its existing presence in the hematology/oncology space and expect the deal to be nicely accretive over time."

Northland Capital Markets analyst David Buck also liked the terms of the deal and appreciated the strength of Jazz's other assets.

Regarding the "key Xyrem [sodium oxybate] narcolepsy drug, the company recently settled patent litigation with secondary abbreviated NDA filers," he said. "The potential for a settlement with a first-filer that blocks generics until mid-2025 could be a key catalyst for shares, although timing is uncertain." Meanwhile, pipeline drug JZP-110 for excessive sleepiness "continues in phase III, with potential data release by the end of 2016," he wrote in a report. "An NDA filing would follow in 2017 on positive data."

The Celator deal is expected to wrap in the third quarter. Shares of the firm (NASDAQ:CPXX) closed Tuesday at $30.08, up $12.55, or 71.6 percent. Jazz (NASDAQ:JAZZ) ended at $151.56, down 53 cents.