In hindsight, it looks like a no-brainer. Take a tried and tested drug that addresses a burgeoning epidemic and make it easier to use. Then sit back and watch the money roll in.
It’s a tempting way to look at the success of six Irish businessmen who this week sold a company they established just over four years ago with a €115 million investment for $635 million, a figure that may rise to $735 million if their drug hits certain sales targets over the next four years.
But life is rarely as simple as that, especially in the pharmaceutical sector, where fortunes are spent developing drugs that never get to market or which don’t prove sufficiently novel – or more effective than existing remedies – to carve a profitable niche for themselves at a time when there is continuous, and growing, pressure on health budgets.
So was it luck, or good judgment, that saw a small Irish pharmaceutical start-up develop an easy-to-use rescue drug that helps revive people who have overdosed on opioids just as abuse of these drugs escalated to crisis proportions in the United States?
A bit of both, maybe.
For a start, the team behind Adapt Pharma weren't neophyte researchers but hard-headed industry veterans with a track record of success.
Séamus Mulligan had already turned around the fortunes of Elan after an off balance sheet accounting scandal and the failure of a novel Alzheimer's drug at trials threatened to collapse the business, masterminding an ambitious $2 billion asset sale programme. Following that rescue, Elan was eventually sold to US company Perrigo for $8.6 billion in 2013.
Mulligan was gone by then, having left to establish Azur Pharma. In 2012, it was acquired by Jazz Pharmaceuticals, another American company, in a $500 million all-stock deal that was completed in early 2012.
Just under two years later, he was back in business with a new company, Adapt Pharma.
Trusted team
A key advantage for Mulligan was his trusted team of colleagues – chief financial officer David Brabazon, chief operations officer Eunan Maguire, chief technology officer Fintan Keegan and the head of the fledgling company's US operations Michael Kelly. All bar Kelly had worked with him at Elan and Kelly had been a part of the leadership group at Azur.
All were shareholders with Mulligan in the venture, along with company secretary and former BDO Simpson Xavier partner James Skehan, who had worked with Mulligan on a number of projects. Mulligan raised the lion's share of the $115 million seed capital by selling an $86 million tranche of his stake in Jazz, acquired under the Azur deal.
Where Azur had specialised in buying established drugs, extending their life and marketing them, the Adapt team quickly found that a rapidly changing pharmaceutical sector meant a similar approach would not work again. Big players such as Endo, Valeant and others were snapping up such prospects, paying top dollar and making their return by raising prices.
Instead, Adapt decided to move back in the pharma cycle, looking at drugs in the later stage of their development. It looked at many options. One of those was a product being developed by a small British company, called Lightlake Therapeutics.
A further attraction was that the drug it was working with, naloxone, was a well-known product. First introduced in 1971, it was commonly used in anaesthesia, reviving patients after they had been put to sleep with fentanyl.
It was also known to be effective in reviving overdose patients. The problem was that it was available only in injectable form – meaning it was only suitable for use by medically trained personnel.
Lightlake was looking to develop a nasal spray version that would be more easily administered. With their background in developing drug delivery technologies and an established drug with a known safety profile, naloxone was an ideal target for the Adapt team.
In pursuing due diligence, it quickly became clear to the Adapt team that the emerging crisis of opioid addiction – particularly in their target market of North America – provided a real market opportunity. While the crisis was not as acute as it is now – where as many as 72,000 people are estimated to have died of drug overdoses in the US last year and President Donald Trump has called it a national emergency – it was clear the trend was negative.
Adapt acquired rights to develop and commercialise the drug in December 2014. Within months, they were in a position to submit an application to the US drug regulator, the Food and Drug Administration (FDA), for priority review.
In September, that priority was granted and, against the background of the escalating drug crisis, the FDA fast-tracked the review process. By November, Adapt had got the green light and by February 2016 – just 15 months after taking control of the drug, they were ready to launch on the US market.
Part of the genius of Narcan was tapping into an already known brand. They found the brand name Narcan and discovered that its owner had recently discontinued the sale of their product. Adapt stepped in and bought the rights to an already recognisable brand name.
A second element was the decision to opt for a relatively modest price point. In an era when cost is an increasingly contentious issue for the pharma sector – and one that is often opaque – Adapt decided from the outset for transparency, setting an up-front price for Narcan at $125 for a pack of two one-dose 4mg sprays.
Crucially, at the same time, it announced a 40 per cent discount for all public health buyers – federal, state and local agencies, emergency services personnel and the departments of education – bringing the price down to $75, or $37.50 per dose.
With the expedited FDA review, an accessible price and a recognised brand, Adapt was able to get the critical users – first responders.
In that first year, they sold $25 million of the drug. This year, the figure will be closer to $170 million, with 2½ million doses shipped.
These public health buyers still account for 60-70 per cent of Narcan’s business but the company is now turning its attention increasingly to the potential of the retail market – especially carers and family members of known opioid drug users.
US advisory
In April this year, the US surgeon general issued a rare advisory “emphasizing the importance of the overdose-reversing drug naloxone”.
“For patients currently taking high doses of opioids as prescribed for pain, individuals misusing prescription opioids, individuals using illicit opioids such as heroin or fentanyl, healthcare practitioners, family and friends of people who have an opioid use disorder, and community members who come into contact with people at risk for opioid overdose, knowing how to use naloxone and keeping it within reach can save a life. Be prepared, get naloxone, save a life.”
It was the first such advisory from the US surgeon general’s office in 13 years – the last one cautioned pregnant women against the dangers of alcohol.
The only form of naloxone available for easy community use as a spray for now is Narcan and the advisory was both an indication of the seriousness with which the US government was taking the issue and a massive boost for the company.
Being name-checked as the drug that could have saved pop star Prince and, more recently, did save the life of singer Demi Lovato after an overdose in her Hollywood home did no harm either.
While Narcan is a prescription drug there is a standard statewide instruction that allows its purchase over the counter in much the same way that Irish patients access the flu vaccine.
Would the market have been as open if the target was junkies, street users of heroin or other opioids who have overdosed? It’s impossible to say but, certainly, the arrival of fentanyl and the growing issue of prescription drug overdose across all demographics and social classes has ensured that national attention in the US is focused on finding some way of halting the growing casualty list.
Narcan doesn’t cure opioid addiction. What it does, according to the US surgeon general and others, is give addicts a second chance, and the opportunity to survive long enough to undergo the more complex area of treatment and recovery.
‘Bittersweet’ decision
The decision to sell the company has been described by people close to it as “bittersweet”. But the capital investment required to scale up production to meet ever-growing demand led the company to look at options.
That ultimately brought them to Emergent. Formed initially as a company supplying a vaccine for anthrax, Emergent has developed a portfolio of therapies for chemical and biological as well as emerging infectious diseases. Its products now treat ebola, the zika virus, botulism, smallpox and even influenza as well as anthrax.
It sees Narcan as an ideal fit for its public-health profile and the strong links with federal and state agencies that its treatments require make is well suited to expand access to the Irish firm’s drug.
Sources close to the Irish business say that Emergent’s commitment to retain the current price structure of Narcan in an era when pharma has been getting a bad name for taking over established drugs and then jacking up prices to a multiple of their original was a key consideration in opting to sell the business to them.
The US company has also committed to taking on Adapt’s 50 staff, 15 of them in Dublin, and continuing to have a base of operations in Ireland. That includes Mulligan’s core team, who will remain with the business. Mulligan himself will act as a consultant to the new owners on the business.
But, as a serial entrepreneur, the likelihood is that he will once again be on the scent of new opportunities. Speaking to students in Trinity College a few years ago after the sale of Azur, Mulligan said: “Entrepreneurship is a bit like a migraine. As you’ll know if you’ve ever had one, it’s fuzzy around the edges but clear at the core.”
That clarity means that, despite the financial success of his companies to date, he is most unlikely to rest on his laurels.
