J&J, GSK and Eli Lilly announce acquisitions, Biogen attempts to buy Sage Therapeutics
Johnson & Johnson’s plans to acquire Bedminster, N.J.-based Intra-Cellular Therapies for $14.6 billion was the largest M&A deal announced during the J.P. Morgan Healthcare Conference in San Francisco last week.
Intra-Cellular’s lead product is Caplyta (lumateperone), a once-daily oral therapy initially approved by the FDA in December 2019 for treating schizophrenia in adults. Then, in December 2021, Caplyta became the first (and is still the only) FDA-approved treatment for depressive episodes associated with bipolar I or II disorder in adults as monotherapy and as adjunctive therapy with lithium or valproate.
Last month, Intra-Cellular submitted a supplemental new drug application for Caplyta as an adjunctive treatment for adults with major depressive disorder.
J&J would also be acquiring a Phase II compound Intra-Cellular has been evaluating as a treatment for generalized anxiety disorder as well as psychosis and agitation associated with Alzheimer’s disease, according to the announcement.
“Building on our nearly 70-year legacy in neuroscience, this unique opportunity to add Intra-Cellular Therapies to our Innovative Medicine business demonstrates our commitment to transforming care and advancing research in some of today’s most devastating neuropsychiatric and neurodegenerative disorders,” said Joaquin Duato, J&J’s CEO. “This acquisition further differentiates our portfolio, serves as a strategic near- and long-term growth catalyst for Johnson & Johnson, and offers compelling value to patients, health systems, and shareholders.”
Under the terms of the definitive agreement the two companies signed, J&J would pay $132 per share in cash for all outstanding shares of Intra-Cellular. The price represents a premium of more than 39% relative to the closing price of Intra-Cellular’s stock on Jan. 10.
The transaction is subject to regulatory and shareholder approval, along with other customary closing conditions, and is expected to close later this year.
GSK and Eli Lilly also announced acquisition plans at the conference.
GSK entered into an agreement to acquire Boston-based IDRx, a biopharma firm that develops precision therapeutics for the treatment of gastrointestinal stromal tumors, or GIST, for $1 billion up front and potentially an additional $150 million milestone payment if IDRx’s lead molecule, IDRX-42, is approved.
The investigational GI cancer candidate is a highly selective KIT tyrosine kinase inhibitor with a “unique ability to target all clinically relevant KIT mutations present in GIST, a major gap in current standard of care,” according to Tony Wood, GSK’s chief scientific officer.
The high selectivity of IDRX-42 may make it more tolerable than Novartis’ Gleevec (imatinib), which typically is recommended as part of the standard of care for GIST.
IDRx licensed the potential best-in-class treatment from Merck KGaA in 2022.
GSK noted in the press release that the transaction is subject to regulatory agency clearances and other customary closing conditions but did not provide an anticipated time frame for completing it.
Meanwhile, Lilly entered into a definitive agreement to acquire Scorpion Therapeutics, a biotech company that is also based in Boston, for up to $2.5 billion in cash — but Lilly is primarily interested in Scorpion’s P13K-alpha inhibitor, STX-478, a once-daily oral, mutant-selective treatment being assessed in a Phase I/II clinical trial for breast cancer and other advanced solid tumors.
The acquisition price includes an undisclosed upfront payment and potential milestone payments. As part of the transaction, Scorpion has agreed to spin out a new company for its non-P13K-alpha pipeline assets and employees. Scorpion’s current shareholders would own a majority stake in the new company, according to a news release announcing the deal, and Lilly would hold a minority equity interest.
Jacob Van Naarden, president of Lilly Oncology, said, “The selectivity profile of STX-478 has led to a differentiated clinical profile, enabling use in combinations with standard-of-care therapies to potentially deliver meaningful impact in earlier treatment settings when there is the best opportunity to improve outcomes for patients.”
The transaction is subject to customary closing conditions. Lilly did not specify an expected closing date.
In other M&A news, Biogen made an unsolicited offer to acquire all outstanding shares of Sage Therapeutics it does not already own for $7.22 per share in cash, per a Jan. 10 filing with the Securities and Exchange Commission. The proposed acquisition price values Sage at approximately $469 million.
Biogen owns slightly more than 10% of the Cambridge, Mass.-based biotech.
The partnership between the two companies began in late 2020 with an agreement to jointly develop and commercialize Zurzuvae (zuranolone) in multiple psychiatric disorders; the drug was approved in August 2023 as the first oral treatment for postpartum depression.
Under the 2020 agreement, which also included another candidate, SAGE-324, Biogen made an upfront payment of $875 million and agreed to make a $650 million equity investment in Sage. Since then, Sage has seen its share price drop from a high of more than $91 in January 2021 to the single digits last year.
On Friday, multiple news outlets reported that Sage filed a legal complaint against Biogen seeking an injunction to enforce a standstill agreement.
Disclosure: Johnson & Johnson and GSK are current Darwin Research Group clients.
HCR #176: Vinay Patel, Founder, MakoRx
This week, join Vinay Patel, founder of MakoRx, as he unpacks the complexities of prescription drug pricing and reveals how MakoRx is disrupting traditional models with cost-plus pricing. This episode is part of our new Pharma Series, an ongoing collection of episodes featuring interviews with the leaders and innovators who are reshaping the future of the pharmaceutical industry. Watch the episode on YouTube or listen to Health Care Rounds wherever you get your podcasts.
What else you need to know
Los Angeles-based Prospect Medical Holdings has filed for bankruptcy. The for-profit hospital operator intends to sell 10 of its 16 hospitals, including four in Pennsylvania (all part of Crozer Health), three in Connecticut, and two in Rhode Island. The remaining hospitals are all in California.
Prospect said in a press release that initiating the voluntary Chapter 11 proceedings would assist in moving the transactions forward in an expedited time frame while ensuring the continued provision of care. PHP Holdings and related subsidiaries, including Foothill Regional Medical Center in Tustin, Calif., are not part of the bankruptcy proceedings, Prospect noted, and are expected to be sold to Astrana Health later this year.
The bankruptcy court granted Prospect interim approval to access up to $100 million in debtor-in-possession financing and to obtain a revolving credit facility of up to $90 million to continue operating. Prospect listed debts exceeding $400 million, CBS News reported, and estimated in the bankruptcy petition that it has more than 100,000 creditors. Prospect blamed several factors for its “financial distress,” which it said began with decreased revenue and increases costs during the COVID-19 pandemic. Inflation, labor expenses, reimbursement rates, and employee pension plans also contributed to the company’s financial difficulties, according to Prospect.
But in a lawsuit filed in October, Pennsylvania’s attorney general’s office accused Prospect of mismanagement and “corporate looting.
Multiple media reports have drawn parallels between Prospect’s path to bankruptcy and that of Steward Health Care. As Axios noted, both Steward and Prospect were previously owned by private equity firms, which took large payouts after selling much of the hospitals’ real estate to Medical Properties Trust (MPT). The operators and their hospitals then had to pay pricey rent on the properties. In a news release, MPT said it has not received any rent from Prospect since last June, while lessees and mortgagers in Connecticut and Pennsylvania have made minimal payments the past two years.
A recent report on the Senate Budget Committee’s investigation into the effects of private equity ownership of health care institutions stated that Prospect’s leadership “exhibited a decades-long history of prioritizing profits over patients” and that after private equity firm Leonard Green & Partners acquired a majority stake in Prospect, “dividend payouts for shareholders grew exponentially while hospital debt compounded.”
The three largest pharmacy benefit managers generated more than $7.3 billion in excess revenue on specialty generic drugs from 2017 to 2022 (relative to the drugs’ estimated acquisition cost), according to a second interim staff report by the Federal Trade Commission. The FTC stated in a press release that Caremark Rx, Express Scripts, and OptumRx “imposed markups of hundreds and thousands of percent on numerous specialty generic drugs dispensed at their affiliated pharmacies—including drugs used to treat cancer, HIV, and other serious diseases and conditions.”
The PBMs also reimbursed their affiliated pharmacies at a higher rate than unaffiliated pharmacies “on nearly every specialty generic drug examined,” the report noted, adding that dispensing patterns suggest the PBMs “may be steering highly profitable prescriptions to their own affiliated pharmacies.” The practice of price spreading generated an estimated $1.4 billion in additional income for the PBMs on the 51 specialty generic drugs included in the investigation during the period studied, according to the report. The PBMs criticized the FTC’s findings in their responses to the report.
Sutter Health established a seven-year partnership with GE Healthcare, called a Care Alliance, to increase access to diagnostic care. The partnership aims to help Sutter gain faster access to novel equipment and technology solutions, the organizations stated in a news release, noting that a key area of initial focus will be on an accelerated technology program featuring some of the most advanced AI-powered imaging technology and digital solutions available to patients. While Bloomberg reported that the partnership could generate $1 billion deal in revenue, Sutter Health’s chief operating officer, Mark Sevco, told Becker’s Hospital Review that figure includes staff and equipment costs. He said Sutter anticipates that the collaboration will save the health system $30 million to $40 million annually through lower costs, standardized equipment, and enhanced service.
Separately, GE Healthcare launched a joint research collaboration with the University of California, San Francisco’s Department of Radiology and Biomedical Imaging. The collaboration, called a Care Innovation Hub, will focus on increasing accessibility to advanced medical imaging, noninvasive diagnosis and management of neurological and neurodegenerative disease, and precision oncology, according to the announcement. Ultimately, GE Healthcare and UCSF hope to develop more automated imaging methods, including ones that can adapt in real time to meet a specific patient’s needs. They also hope to use advanced imaging to better understand brain functions and develop quantitative imaging methods to evaluate how patients respond to radiopharmaceutical therapies.
Oregon’s largest health care strike, which began on Jan. 10, continued through last week. Nearly 5,000 nurses, physicians, and other medical professionals at eight Providence hospitals and six Providence Women’s Clinic locations are asking for better wages and benefits, as well as safe staffing ratios. The open-ended strike follows more than a year of failed contract negotiations between Providence and union leaders and marks the first time in Oregon’s history that doctors have gone on strike. Only unionized physicians at Providence St. Vincent Medical Center and the Women’s Clinic are participating in the strike. Providence has paid to bring in 2,000 temporary nurse replacements but cannot bring in replacements for the physicians or providers.
Amazon Web Services (AWS) and venture capital firm General Catalyst will collaborate on the use of generative AI to improve patient outcomes and access to quality care. The focus will be on co-developing and deploying integrated AI-powered solutions that can address critical needs in areas such as predictive and personalized care, diagnostics, interoperability, patient engagement, and operational and clinical efficiency, a news article on Amazon’s website noted. AWS and General Catalyst will partner with health care organizations to test and refine solutions developed through the collaboration in clinical environments. Financial terms were not disclosed.
The Department of Justice filed a civil complaint alleging that Walgreens dispensed millions of prescriptions for controlled substances that lacked a legitimate medical purpose, were not valid, or were not issued in the usual course of professional practice, from around August 2012 to the present. Some of the unlawful prescriptions filled were for dangerous and excessive quantities of opioids, early refills of opioids, or the “trinity” — a combination of an opioid, a benzodiazepine, and a muscle relaxant, which the DOJ described as especially dangerous. In dispensing the prescriptions, Walgreens violated the Controlled Substances Act, the DOJ stated in a press release, adding that Walgreens also violated the False Claims Act by seeking reimbursement for many of the prescriptions from federal health care programs.
The lawsuit is similar to one the DOJ filed against CVS in mid-December. Walgreens’ response to the lawsuit was also similar to CVS’ response. Walgreens said the government is attempting to enforce “arbitrary ‘rules’ that … never went through any official rulemaking process” and “simply do not exist.”
What we’re reading
AI and the Art of Nursing. Medscape, 1.10.25
Innovation At CMS: Advancing A Person-Centered Health System. Health Affairs, 1.15.25
