GBT: Possible M&A Target By Year End?
Mark Jukic

Global Blood Therapeutics is a clinical-stage biopharmaceutical dedicated to discovering, developing and commercializing novel therapeutics to treat grievous blood-based disorders with significant unmet need.

GBT’s lead product is GBT440, which is a treatment for sickle cell disease (SCD) and idiopathic pulmonary fibrosis (IPF). SCD is caused by a mutation in hemoglobin which then results to the development of abnormal hemoglobin. Hemoglobin is found in red blood cells which also carry oxygen throughout the body. SCD currently does not have that many approved treatments. Any progress made throughout the GBT440 clinical trials could be significant for the overall treatment of SCD, as well as IPF. While GBT440 is a treatment for SCD, bluebird bio is developing a cure for SCD (LentiGlobin). LentiGlobin is a gene therapy that uses stem cell transplants that help curb away symptoms of SCD within patients. However, this cure will be difficult to develop, and will also cost a fortune. Eventually, a treatment such as LentiGlobin will face serious obstacles from insurance companies due to the likelihood of a hefty price tag. With that being said, GBT, at this rate, will hit the market first if they meet the requirements laid out by the FDA for their pivotal PIII readout due in 2019.

GBT440 is taken once daily with the purpose of inhibiting Hb polymerization in Sickle Cell Disease. This would then prevent red blood cells from stiffening and deforming into the sickle cell shapes. The lifespan of these RBC’s should increase with the use of GBT440 assuming that it works as intended. An ongoing Phase 1/2 randomized, double-blind, placebo-controlled study was conducted to measure hemolysis and anemia versus placebo. 56 total patients were enrolled into the trial with the following group structure (per GBT):

– 38 patients enrolled into 28-day cohorts
– 28 patients received GBT440 with 500, 700, or 1000 mg doses
– 10 patients received placebo
– 2 patients with the HbSC genotype were enrolled
– 16 patients were enrolled into 90-day cohorts
– 12 patients received GBT440 with 700 or 900 mg doses
– 4 patients received placebo
– 5 patients continued into the extension study, all of which took the GBT440 at 900 mg doses

While the patient population is relatively small, there was a decrease in hospital visits due to painful crises compared to placebo. 700mg and 900mg Cohorts boasted a reduction in hospitalizations compared with placebo (68% and 71% respectively vs. 50% placebo). When looking into efficacy, all patients (n=41) have shown some type of hematologic response with doses of GBT440 for up to 6 months. 46% of patients demonstrated a clinically significant increase in Hb (>1g/dL increase) compared to 0% of placebo (P-value = 0.006). This also resulted to a greater than 70% median decrease in irreversibly sickled cells. It is also worth noting that bilirubin in the 700mg Cohort (n=6) reduced by 37% compared to the 20% increase in the two arm placebo. Reticulocyte levels also decreased by 20% compared to the 20% increase in the placebo.

No serious of adverse events were noted throughout the trial, especially sickle cell based events. Treatment-related events were nothing higher than Grade 1 or Grade 2 in severity levels. Additionally, no treatment-related events occurred with the dosing beyond 90 days in the trial.

Overall, data currently shows a favorable safety profile and shows a clear reduction in hemolysis. While the patient population is minuscule, the efficacy is still clinically revenant and significant. However, it will not be until the pivotal PIII readout until we really get the full story with GBT440. Clinical data thus far has been positive, to say the least, but there are still some possible red flags that could cause quite the hiccup for eventual approval. It is likely that the FDA trial structure will ensure that this drug performs optimally for SCD in decreasing bilirubin and reticulocyte levels, while also consistently delivering oxygen to the hemoglobin. The pivotal PIII 400 patient trial is currently ongoing. The FDA, while granting fast track and orphan drug designation for GBT440, will need to boast a >1g/dL increase in hemoglobin levels, as well as meeting a specified secondary endpoint for it to be approved. Data is still quite some time away, which gives it that much more time to attract some interest before the most important catalyst for the company is released.

In March 2017, there was a rumor that Novo Nordisk was possibly interested in making a bid for GBT. Biotech journalist, Jacob Plieth, received a tip that NVO’s board has authorized a bid for up to $45 per share. M&A rumors in biotech are comical most of the time, considering that these rumors are typically a quick pump and dump for any of the companies involved. Typically, it seems that these transactions always occur when we least expect it, with unexpected participants at the helm. However, there could be some truth to this specific claim. Although it has been some time since the rumor came out, current GBT market cap, combined with NVO M&A goals, make this quite the ideal transaction. Per the CEO of NVO, “We have strong relationships with hematologists and there could be other products that would be relevant for us to acquire and we are looking for that. Any deals would most likely be “bolt-ons” rather that anything very large. In my view, we should do smaller deals, low single-digit billions of dollars.”

GBT has a phase IIa 16 patient study for GBT440 in IPF. This will be a significant catalyst for the company, for the time being, considering that the PIII for SCD will not be released for another couple years. The data readout for GBT440 in IPF should be released by July. I personally suggest avoiding this catalyst and only playing the possible run up into the data release. A positive outcome for this IPF trial will just further bolster the GBT440 market potential.

GBT440 for SCD, assuming a 20-30% market share consumption, could net anywhere from $1-2 billion in peak sales (conservative) if approved. This would solve a serious unmet need for a disease that does not have many options. Additionally, the cost of treatment would likely be manageable, thus not facing as much headache/resistance from insurance companies.

Overall, GBT could be a long term play post-IPF data for a possible buyout. There seems to be a convincing connection between GBT and NVO (without discounting any other possible takeover connections currently unknown). With that being said, GBT could be a valuable target for companies that want to solidify footing in the rare disease category. One could argue that NVO will stick to their roots and try to acquire assets more aligned to their niche. A successful SCD/IPF drug would not only be a blockbuster but also could be the focal point for any given company pipeline. This, of course, is contingent on the GBT440’s overall success. GBT could also receive a nice premium based on their low MC and technology potential through their lead GBT440 for both SCD and IPF. Premium B/O price could range anywhere from $42-47 per share. Depending on the upcoming catalyst, this price could adjust based on market reaction and trading.

Disclaimer: I am not / do not plan on creating a position in GBT within the next 48 hours. This is purely my approach to GBT and the potential value that may derive from a long-term position in the company. Trade at your own risk.

References:
http://www.globalbloodtx.com/file.cfm/22/docs/TS-GB-02733-3_Howard_001GBT_ASH_Poster_V23_FINAL.PDF

http://www.globalbloodtx.com