Pharma Deal Abbvie, Boehringer Ink Billion-Euro Deal

U.S. drug maker Abbvie has entered into a partnership with German pharmaceutical company Boehringer Ingelheim for the development of drugs to treat autoimmune diseases.

The molecule known by its nondescript designation BI 655066 had not been a superstar in the research pipeline of German pharmaceutical producer Boehringer Ingelheim. But last year it came into its own, when Boehringer Ingelheim announced surprisingly strong test results in a study on the treatment of psoriasis.

A year on, the commercial potential of BI 655066 is clear and U.S. drug maker Abbvie shelled out $595 million (€540 million) to gain access to the drug and another substance from Boehringer's immunology research division.

Abbvie gets the global distribution rights for the drug and will shoulder future development costs. The deal strengthens the U.S. company's position in the field of autoimmune diseases. Boehringer is entitled to further milestone payments and a share of the profits. The total financial volume of the alliance is likely to exceed €1 billion.

Boehringer, based in Ingelheim near Frankfurt, stresses that the deal should not be viewed as its withdrawal from the field. "We do not intend to say goodbye to the field of autoimmune diseases," said Jan Poth, head of the company's therapeutic area, noting that Boehringer still has other substances in the pipeline that it intends to develop on its own.

We are confident that we are getting the best product in the class, and we assume that it will be the market leader in psoriasis treatment in a few years. Henry Gosebruch, Abbvie chief strategist

According to Mr. Poth, the main objective of the Abbvie deal is to fully exploit the drug's possibly substantial market potential. In the study, the drug showed substantially better results than the current leading product against psoriasis, Johnson & Johnson's Stelara, which recently accounted for about $2.5 billion in sales. If the positive study data are confirmed in a larger drug approval trial, the Boehringer product could generate substantial sales.

"We are confident that we are getting the best product in the class, and we assume that it will be the market leader in psoriasis treatment in a few years," said Abbvie chief strategist Henry Gosebruch.

Autoimmune diseases occur when an overactive immune system attacks the body's own tissue, such as skin cells in psoriasis, nerve cells in multiple sclerosis, the intestinal walls in Crohn's disease or in joint tissue in rheumatoid arthritis. The field has developed into a goldmine for the pharmaceutical industry since the mid-1990s, and companies are now earning more than $60 billion in total annual sales of drugs that reduce excessive immune activity.

Thanks to its extremely successful rheumatism drug, Humira, Abbvie is already the leading provider in the field today. As a result, Abbvie operates with a strong global sales force, while Boehringer is a newcomer in the field.

Abbvie has also had positive experiences with acquisitions in Germany in the past. Humira, the world's top-selling drug, with $14 billion in annual sales, emerged from the research labs of BASF, whose pharmaceutical division Abbvie had acquired in 2001. Like BASF at the time, Boehringer feels that its sales department is not strong enough to fully exploit possibilities with the new product.

With about $13 billion in annual sales, Boehringer is Germany's second-largest pharmaceutical company after Bayer and No. 19 globally. It would have had to build its own sales force for the new indication and was apparently eager to avoid this challenge.

The deal is also likely to offer the privately held company a welcome chance to spread its research risks somewhat more broadly and bolster its liquidity position. This is important to Boehringer, which is currently preparing its biggest acquisition to date, a takeover of the Sanofi animal health business for about €11.4 billion. While the company intends to offset the lion's share of the price by handing over its consumer health division, or nonprescription drugs, to Sanofi, it is still expected to owe another €4.7 billion in cash.

With a net liquidity of more than €7 billion most recently, Boehringer is theoretically in good shape for a transaction of this magnitude but there is no denying that €3-4 billion in cash is a useful safety buffer.


Siegfried Hofmann is Handelsblatt's chemical and pharmaceutical industries correspondent. To contact the author: [email protected]