Behind the curtain on Lundbeck's Alder buy

On its second try, Lundbeck increased the aggregate price to $19 per share total, $17 up front and $2 contingent on approvals and blockbuster sales.

Alder BioPharmaceuticals was looking for an ex-U.S. partner for its late-stage CGRP drug. Lundbeck was looking to expand its brain disease focus.

They ended up with a $2 billion buyout.

The full buyout idea got its first big push March 6, when Lundbeck CEO Deborah Dunsire was in an unrelated meeting with Alder board member and Seattle Genetics CEO Clay Siegall.

Lundbeck would be interested in "a broader scope transaction," Dunsire told him. Soon after, Alder's board tagged Lundbeck as the frontrunner for the ex-U.S. partnership—but then the company confirmed it would be willing to consider a sale.

Aiming to avoid jeopardizing the licensing talks, the pair decided to run the two negotiations in parallel. And meanwhile, the FDA gave Alder a bit of a boost: On April 22, Alder said the agency had accepted its eptinezumab approval application and set a decision date of Feb. 21, 2020.

In July, Lundbeck made its first proposal to buy Alder out. At that time, the Danish company offered $14 per share up front, along with a contingent value of up to $4.50 per share if eptinezumab won EMA and U.S. approvals and achieved annual sales of more than $1 billion within 10 years of launch.

The answer from Alder's board? No.

Again, no.

On the licensing side, negotiations were moving along. By August, the two companies had "substantially finalized" a partnership deal, with Lundbeck committing $250 million in upfront and milestone payments through eptinezumab's European approval, plus $510 million more linked to regulatory and sales milestones.

But on Aug. 12, Alder's board authorized CEO Robert Azelby to reach out to Lundbeck with a counteroffer: $18 per Alder share and up to $5 contingent upon achieving up to three milestones.

After another round of back-and-forth between Dunsire and Azelby, Lundbeck on Aug. 16 made the $18-plus-$2 offer that eventually approved by Alder's board and published Sept. 16, a Monday. By then, the up-front cash alone represented a 79% premium over the closing price of Alder on the previous Friday.

With the deal, Lundbeck is getting a chance at the CGRP inhibitor migraine market—a blockbuster field where Amgen and Novartis, Eli Lilly and Teva are already battling out with their subcutaneous injections. The three existing players—Aimovig, Emgality and Ajovy—all launched with free drug programs and are now working on moving patients over to paid programs as payer access improves.

The difference for eptinezumab, of course, is that it's an IV drug. Lundbeck believes that administration path won't be a barrier to uptake because many neurologists are well-equipped to deliver IV meds. RBC Capital analyst Brian Abrahams agreed, based on his team’s feedback from a patient survey and conversation with experts.

Eptinezumab could reach peak global sales of over $750 million, Abrahams figured in a recent investor's note, and "having a larger, neuro-focused commercial company launch the product should address concerns over Alder’s ability to compete with larger players."

Alder’s CGRP infusion med, eptinezumab, attracted 10 companies interested in a potential ex-U.S. partnership in early 2019, a securities filing shows. After they had their chance to dig into the numbers, five submitted proposals, but one of them wanted more than just regional rights to a single therapy.

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