Investors in European drugmakers have been feeling nauseous of late as they stomach the double dose of Donald Trump’s re-election on a fresh pledge pf protectionism and the proposed instalment of anti-vaccine activist Robert F Kennedy jnr as his health secretary.
But Switzerland’s Roche had already long stood out as a weak spot – falling as much as 30 per cent in the past three years as the wider sector advanced as much as 37 per cent – amid slumping demand for its Covid-19 test kits, some high-profile drug candidate failures, and a struggle to play catch-up in the obesity-drugs arms race.
Roche passed in 2018 on a right of first refusal to buy a potential weight-loss blockbuster pill that was subsequently snapped up by Ely Lilly for $50 million (€47.4 million).
Currently in late-stage clinical trials, the drug is expected by analysts to generate $50 billion in global revenues within six years of launch, which could come in 2026, subject to regulatory approval.
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Roche now hopes its purchase of Carmot, which has an obesity drug that may also launch in 2026, for as much as $3.1 billion earlier this year will get it back into what has become the hottest are for the sector, currently dominated by Novo Nordisk and Eli Lilly.
The opportunity is considerable. The market for weight-loss treatments is expected to reach $200 billion by 2031, according to a recent report from US financial research firms Morningstar and Pitchbook.
For long-suffering shareholders brave enough to remain on board since the IPO, the Poseida sale raises the real prospect of them ultimately breaking even on their original €10-a-share outlay.
Roche, of course, hasn’t survived almost 130 years with an all-chips-on-one-spin bets.
This week, it upped a defence of its most lucrative area for years – oncology – by agreeing to buy San Diego biotech Poseida, which is developing a range of next-generation cell and gene therapies, targeting prostate, breast and lung tumours, as well as blood cancers.
Worth up to $1.5 billion, the deal represents a significant shot in the arm for one of the smallest companies on the Irish stock market: Malin Corporation, which owns 12 per cent of Poseida.
But it will hasten the demise of the life sciences investment company as it focuses on selling down assets and the returning of cash to investors. It would bring an end to the rollercoaster ride investors have endured since it floated nine years ago.
Malin was floated in Dublin at €10 a share in March 2015 by Elan’s former chief executive Kelly Martin and others in the afterglow of the sale of the group’s $8.6 billion sale two years earlier. It raised €372 million between the initial public offering (IPO) and a follow-own share sale later that year.
While the aim was to invest in a small portfolio of promising companies and keep its own costs down to a minimum, its shares began to slide a little over two years later as investors began to question the ragbag of 16 start-ups it had bought into in various fields – and soaring head office costs.
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Many investments proved disastrous. Antibiotics maker Melinta and acne drug developer Novan, for example, would file for bankruptcy protection from their creditors in 2019 and 2023, respectively. Others, such as NeuVT and Serenus, would be written down to zero and ultimately slip into voluntary liquidation.
A strategic review completed in late 2018 after a management and boardroom overhaul saw running expenses slashed and Malin refocus mainly around four priority assets: Poseida; Immunocore, which has developed an eye cancer therapy; eczema-targeting Kymab; and Mycovia (Viamet), which focuses on antifungal products.
Under Darragh Lyons, who was chief executive between late 2019 and 2023, Malin managed to return more than €220 million to shareholders as it sold its interests in Kymab (to French drugs group Sanofi), Immunocoe (to stock market investors) and injectable medicines company Altan (to a French business called Ethypharm).
The Poseida deal – which will see Malin receive a $106.5 million upfront payment from Roche and up to a further $47.3 million in time – has prompted Dunlevy and Daniel to scrap a plan, unveiled only weeks ago, for another share buyback.
Malin, now led by executive director Fiona Dunlevy and executive chairman Liam Daniel, sold its stake in CG Oncology, which has a bladder cancer treatment in late clinical trials, in July for €28.5 million. It marked a 175 per cent gain on the money Malin committed to the firm.
The Poseida deal – which will see Malin receive a $106.5 million upfront payment from Roche and up to a further $47.3 million in time – has prompted Dunlevy and Daniel to scrap a plan, unveiled only weeks ago, for another share buyback.
That’s because the Poseida stake sale, at a multiple of the most recent value ($33.7 million) Malin had put on it, has lifted the intrinsic value of the company’s shares to €10.17 – well above the €6.65 the board was planning to pay to mop up more stock.
Also included in the intrinsic value are remaining investments, led by Viamet, that are pencilled in at less than €28 million. It’s only a matter of time before the stock is delisted, removing another company the embattled Irish stock market.
For long-suffering shareholders brave enough to remain on board since the IPO, the Poseida sale raises the real prospect of them ultimately breaking even on their original €10-a-share outlay.
That ignores the effects of inflation and cost of investors forgoing opportunities elsewhere. But considering the stock was changing hands for as little as €1.60 a-piece 4½ years ago, it’s an achievement.
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