Cephalon, Inc. (CEPH) continues to look towards in-licensing deals and acquisitions to boost its pipeline. The company recently entered into a definitive merger agreement with privately-held biopharma company, Gemin X Pharmaceuticals, Inc., whereby Cephalon will acquire Gemin X for $225 million cash. In addition to $225 million, Cephalon could pay up to $300 million on the achievement of regulatory and sales milestones.
Cephalon is looking to strengthen its oncology pipeline with the acquisition of Gemin X. Obatoclax (GX15-070), the lead pipeline candidate at Gemin X, is being studied for the treatment of extensive stage small cell lung cancer (ES-SCLC). Obatoclax is currently in a randomized, controlled, phase IIb study which is evaluating the safety and efficacy of the candidate in combination with standard chemotherapy for the first line treatment of ES-SCLC. Data should be available shortly.
The second most advanced candidate at Gemin X is teglarinad (GMX1777), which is in phase I/II development.
Cephalon has been pretty active on the deal-making front over the past few quarters. The company has been looking to expand into new therapeutic areas to drive long-term growth.
Deals signed over the last few quarters include the Ception and Arana Therapeutics acquisitions, and deals with Alba Therapeutics Corporation, ImmuPharma, and Mesoblast Limited among others. In addition to building a presence in new therapeutic areas, Cephalon also entered the generics market through its acquisition of Swiss generic company Mepha AG.
The Gemin X acquisition is scheduled to close in the second quarter of 2011.
Neutral on Cephalon
We currently have a Neutral recommendation on Cephalon, which is supported by a Zacks #3 Rank. With Provigil sales remaining strong, we remain concerned about the slower-than-expected conversion of patients to Nuvigil. Moreover, generic versions of Fentora could enter the market with generic company, Watson Pharmaceuticals (WPI) receiving a favorable court ruling (on two of the three disputed patents) recently.
Both 2012 and 2013 should be challenging years for the company due to the genericization of Provigil. However, we are pleased with Cephalon’s efforts to reduce its dependence on its central nervous system franchise.
Cephalon is looking to expand into new therapeutic areas to drive long-term growth and has been very active on the in-licensing/acquisition front over the past few quarters. The company is also looking to expand its presence in markets like China.
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