Mallinckrodt to acquire Sucampo Pharmaceuticals for $1.2 billion

Mallinckrodt plc, a leading global specialty pharmaceutical company, and Sucampo Pharmaceuticals, Inc., a global biopharmaceutical company, have entered into an agreement under which Mallinckrodt will acquire Sucampo, including its commercial and development assets.

Mallinckrodt’s acquisition of Sucampo helps Mallinckrodt to achieve near-term net sales and earnings accretion through Amitiza and also this acquisition will bolster Mallinckrodt’s pipeline in rare diseases.

Lets have deeper insight into this acquisition.

Sucampo’s commercial assets:

1. Amitiza (lubiprostone), a leading global product in the branded constipation market, is approved by the US Food and Drug Administration (FDA) for treatment of chronic idiopathic constipation (CIC) in adults, irritable bowel syndrome with constipation (IBS-C) in women 18 years of age and older, and opioid-induced constipation (OIC) in adult patients with chronic, non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent opioid dosage escalation. Amitiza is a chloride channel activator which increases fluid secretion and motility of the intestine, facilitating passage of stool. The FDA is currently reviewing a supplemental New Drug Application (sNDA) for Amitiza in children 6 to 17 years of age with pediatric functional constipation (PFC). The sNDA received a Priority Review designation and has a user fee goal date of January 28, 2018.

Roughly 40 million patients in the US suffer from some form of chronic constipation. While the most common treatments include over-the-counter laxatives, branded prescription drugs hold about 10% of the total chronic constipation market, resulting in approximately 4.2 million prescriptions and annual growth of 10% to 15%. In 2016, net sales of branded products for treatment of CIC, OIC and IBS-C were $1.6 billion, with Amitiza holding approximately 30% of those net sales. Of the branded products currently marketed, only Amitiza is approved for three constipation indications in the US. The drug is promoted through commercial agreements in the US, the United Kingdom and Switzerland (all through Takeda Pharmaceutical Company Ltd.), and in Japan (Mylan N.V.). An Investigational New Drug Application for the product has been accepted in China (Harbin Gloria Pharmaceuticals Co., Ltd.). Reported 2016 global net sales of Amitiza equaled $456 million. If approved for PFC in the first quarter of 2018, Amitiza would be the first and only approved prescription therapy available to treat children with PFC, a condition which affects approximately 18% of the pediatric population.

2. Rescula (unoprostone isopropyl ophthalmic solution) 0.15%, is indicated for ocular hypertension and open-angle glaucoma, and marketed in Japan. Mallinckrodt will acquire global rights to the product, with annual net sales of approximately $9 million.

Sucampo’s development assets:

1. VTS-270 is in phase 3 development for Niemann-Pick Type C (NPC). NPC is a rare, neurodegenerative, and ultimately fatal disease that can present at any age.

The FDA granted VTS-270 its Orphan Drug Designation, and the resulting seven years’ exclusivity would be applied upon approval of the drug. The European Medicines Agency (EMA) also granted VTS-270 Orphan Drug status. In addition, the FDA granted the compound its Breakthrough Designation, indicating the drug is (1) intended to treat a serious or life-threatening disease or condition alone or combined with one or more other drugs, and (2) preliminary clinical evidence indicates it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The Breakthrough Designation status results in expedited review by the agency.

Additionally, since VTS-270 has been designated as a rare pediatric disease treatment, it is expected – upon successful completion of the VTS-270 phase 3 trial and submission of the regulatory filing and subsequent approval of the New Drug Application (NDA) by the FDA – that the company would receive a Priority Review Voucher, awarded by the agency to those sponsors that meet certain criteria. Once received, the voucher could be redeemed by Mallinckrodt to receive priority review of a subsequent separate product’s marketing application, or the company could choose to monetize the voucher. If the company receives the voucher and chooses to monetize it, a part of the proceeds would be shared with VTS-270’s former owner’s (Vtesse Inc.) shareholders.

2. CPP-1X/sulindac is in phase 3 development for Familial Adenomatous Polyposis (FAP) under a collaborative agreement between Cancer Prevention Pharmaceuticals (CPP) and Sucampo.

The FDA granted CPP-1X/sulindac its Orphan Drug Designation, as well as its Fast Track designation, a process designed to facilitate development and expedite the review of drugs to treat serious conditions and fill an unmet medical need. Orphan Drug status was also granted to the therapy by the EMA.

A phase 2 Proof of Concept trial in FAP and a phase 2/3 trial in high-risk polyp formers demonstrated the potential for CPP-1X/sulindac in patients with FAP. Current therapeutic interventions are limited to endoscopies and surgeries, which only decrease polyp burden in the gastrointestinal tract and do not address other disease manifestations. CPP-1X/sulindac, if approved, will target the underlying disease mechanism, preventing polyp growth and delaying disease progression.

Completion of the phase 3 trial is currently expected at the end of 2018. Assuming positive phase 3 data, Mallinckrodt would acquire the exclusive option to obtain North American commercial rights for a nominal fee, with CPP retaining rights to the rest of the world. The NDA filing is currently expected in early 2019, with approval also anticipated in 2019. Peak US potential net sales for the product are estimated at greater than $300 million. A part of the profits from commercialization of CPP-1X/sulindac would be shared with CPP.

Commercialization: If approved, Mallinckrodt expects to build on the limited commercial infrastructure Sucampo has built for both VTS-270 and CPP-1X/sulindac with its sales organizations currently focused on rare diseases. At launch, patient access to these unique treatment options would also be supported and enhanced by Mallinckrodt’s strong relationships with insurance companies and group purchasing organizations. Mallinckrodt’s existing infrastructure of clinical and medical affairs experts will also support approval and launch of both products.

The transaction is subject to customary closing conditions, including expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and the tender of a majority of the outstanding Sucampo shares.

Deutsche Bank served as Mallinckrodt’s exclusive financial advisor; Wachtell, Lipton, Rosen & Katz served as its exclusive legal advisor. Jefferies LLC served as Sucampo’s exclusive financial advisor; Cooley LLP served as its exclusive legal advisor.