The 'No-shop' (11.2) and 'No-talk' (11.3) provisions really constrains Viralytics from what they can do in the area of 'offers' unfortunately. I find the previous references to BMS (not just them) as potential candidates for a superior proposal interesting. The data should help inform who may be interested in bidding.
BMS has already observed a marginally superior ORR for its Yervoy + Opdivo combination (58% [Wolchok et al., 2017] vs. 57% [Viralytics, 2016] and 50% [Viralytics, 2017]). Pooled analysis safety profile of the Yervoy + Opdivo combination clearly indicates that the safety profile is less than desirable (Grade 3/4 AEs for 55.5% of patients; Sznol et al., 2017) and substantially less safe than MITCI obviously. Similar (yet lower) ORR with a superior safety profile - is that enough appetite for BMS to put a proposal against Merck? I'm not sure but perhaps the risk of commercial failure and development costs with Cavatak is considerable for BMS. They've already demonstrated the 'success' (at least in advanced melanoma) that BMS has already demonstrated with two commercial drugs, i.e. Yervoy and Opdivo.
Cost-wise: The cost of acquisition represents approx. 1.9% for Merck (USD $394M / USD $20.6B - see 5.2 on their cash equivalents). Comparatively, the estimated cost of acquisition represents at least 7.3% for BMS (USD $394M / USD $5,421M - see BMS 2017 Annual Report). Would it be worth it for BMS? How much more revenue would be generated if they commercialised Cavatak given the cost? Would it be an acceptable return? Who knows. Then again, '4.7.1 Comparable transactions' shows that BMS were willing to spend USD $800 on acquiring a company (FLX Bio, Inc) that has demonstrated absolutely no evidence of anti-cancer efficacy in human studies. You can make that of what you will about their risk tolerance when it comes to acquiring companies.
It's important to view the bid from Merck in the context of their current results for Keytruda. They've demonstrated a 36% (n=279) and 37% (n=277) ORR (Keytruda) compared to 13% (n=278) ORR (Yervoy) for advanced melanoma (Schachter et., 2017) - that's a considerable difference! This isn't extensive (and without considering sample sizes) but combination studies with Keytruda are demonstrating between 42% - 61% ORR (Atkins et al., 2017; Long et al., 2017; Ribas et al., 2016; Zakharia et al., 2017). Note that one study used triple combination to achieve 60% ORR and it was a Keytruda + Yervoy (KEYNOTE-029) that resulted in 61% ORR. CAPRA similarly demonstrated 61% ORR with a better safety profile. The cases between Merck and BMS appear to be similar in terms of evidence base for combination.
The AUD $502.4M (arguably small?) valuation should also be placed in context of the current evidence for NSCLC which Keytruda is currently (and only last year) approved first-line treatment in the U.S. Keytruda + Chemotherapy for NSCLC yielded a 47.6% ORR (Gandhi et al., 2018). I can't see any official response rates but the KEYNOTE-200 preliminary data (Page 41 of IOVC) appears to show a 50% ORR (5/10?) for NSCLC. The incentive of Merck to use Cavatak is high for its NSCLC treatment market but so too is the risk given the less than substantial evidence of efficacy of Cavatak for NSCLC. Maybe the valuation reflects that? In the absence of combination study results that are concrete for other indications, my opinion is that it's unlikely that a superior proposal will emerge.
Sorry about the essay - I find this really interesting especially the data side as ultimately it is the breadth and quality of available evidence that plays a major role in driving competitor interest and influence their risk perception. I only wrote about BMS and Merck but there could be a number of other interested companies. The 'Appendix 3: Comparable transactions' section shows that a range of different indications are driving acquisitions.
I really want to be wrong for the sake of myself and everyone here. For what it's worth, I will be voting yes.
