Unrest in the Middle East and escalating oil prices caused uncertainty in the U.S. markets last week, which spilled over to the biotechnology sector. Blue-chip biotechs held firm, however, amid spate of billion-dollar deals.
This article published with permission from The Burrill Report.
Unrest in the Middle East and escalating oil prices caused uncertainty in the U.S. markets this week, which spilled over to the biotechnology sector. The Dow Jones Industrial Average closed the week down 2% and the Nasdaq Composite Index also fell to close down 1%.
Biotech's blue-chip companies held firm with marginal gains, apart from Gilead Sciences Inc. (NASDAQ: GILD), whose shares fell 0.7%. Gilead Sciences said it would pay up to $600 million for venture-backed Calistoga Pharmaceuticals Inc. and the Seattle company’s cancer drug, giving Gilead a boost to its oncology pipeline and possibly helping it move past a lackluster foray into cardiovascular therapies.
Calistoga’s cancer drug, CAL-101, is currently in mid-stage studies, testing it as a treatment for refractory indolent non-Hodgkin's lymphoma and chronic lymphocytic leukemia. Under the terms of the agreement, Gilead will pay $375 million upfront and up to $225 million in potential milestones. Gilead’s shares closed at $38.98 Monday.
Gilead has worked hard to diversify its revenue-base, which is heavily dependent on HIV treatments. But the Foster City, Calif., company’s first attempt at doing so, with an expansion into cardiovascular medicines, has yet to contribute the kind of revenue that will help it protect potential losses from competition to its HIV franchise, which includes market-leaders, such as Truvada and Atripla. Medicines from its cardiovascular-focused acquisitions of Myogen and CV Therapeutics contribute less than a quarter of Gilead’s revenue.
In another major deal, Forest Laboratories Inc. (NYXSE: FRX) said it will pay $1.2 billion to acquire Newton, Mass.-based Clinical Data Inc. (NASDAQ: CLDA) and its newly approved antidepressant, Viibryd, a year ahead of looming generic competition for Lexapro, its blockbuster depression drug that loses patent protection in 2012.
The deal provides a $30 per share payment for Clinical Data investors and up to $6 per share more if Viibryid achieves certain undisclosed commercial milestones. Though Viibryd is not touted as a revolutionary new drug, the market for treating major depressive disorder is more than 200 million prescriptions strong annually and growing. Given that people often switch antidepressants in search of the best-suited treatment for their illness, it is easier for newly approved drugs to gain a foothold in the category.
Forest, headquartered in New York, plans to launch Viibryd in the U.S. during the second half of 2011 with a significant marketing and sales investment. And while it already has a sales force in place to support its portfolio of relatively young products, the company plans to expand its sales staff with as many as 300 new hires to support the Viibryd rollout, according to Medical Marketing and Media magazine.
Forest says the acquisition will be dilutive to its earnings per share for the next three fiscal years, but may become accretive during fiscal 2014. Nonetheless, it has no plans to hold back if attractive new opportunities present themselves in the meantime. Monday, Forest shares were at $32.40; Clinical Data’s shares were at $30.37.
Elsewhere, Japan’s Astellas Pharma Inc. said it will pay $125 million upfront and as much as $1.3 billion later to develop and commercialize an experimental cancer drug created by Aveo Pharmaceuticals Inc. (NASDAQ: AVEO) of Cambridge, Mass.
The partners are seeking to get the drug, tivozanib approved for kidney cancer. If successful, the drug would put new competitive pressure on two leading cancer medicines. It will also help Astellas solidify its U.S. cancer franchise, a presence it firmly established in May 2010 when it bought OSI Pharmaceuticals for $3.5 billion.
An early-stage study has already shown tivozanib to be as effective as Pfizer’s Sutent. Now the medicine is in a head-to-head, late-stage trial comparing its safety and efficacy to Nexavar. Data from that study is expected in mid-2011. Meanwhile, Aveo is running further trials of the drug in the treatment of other solid tumor types.
The $125 million payment for Aveo covers both licensing and early research and development costs for tivozanib. In addition, Aveo is eligible for $575 million in clinical and regulatory milestones and more than $780 million in commercial milestones. Monday, shares of Aveo closed at $13.78.
In other market-moving news:
The U.S. Food and Drug Administration notified Protalix BioTherapeutics Inc. (NYSE: PLX) of Miami that it would not approve taliglucerase alfa, its experimental treatment for Gaucher disease, without additional information. Taliglucerase alfa is a form of glucocerebrosidase expressed by plant cells. The company said the main questions raised by the FDA relate to clinical and chemistry issues, manufacturing, and controls. The agency did not request additional clinical studies. In November 2009, Pfizer Inc. (NYSE: PFE), based in New York, and Protalix entered into an agreement to develop and commercialize taliglucerase alfa. Monday, Protalix shares closed at $7.05, while shares of Pfizer were at $19.24.
The FDA warned Sanofi-Aventis S.A. (NYSE: SNY) for failing to report in a timely manner adverse reactions in people who used its drugs, Reuters reported. The agency said in a letter to the French pharmaceutical giant that it previously promised to take corrective steps to address deficiencies in its reporting. “We remain concerned that your .... adverse drug experience reporting system has not been fully validated, and may have resulted in inaccurate assessment and untimely submission of 15-day alerts,” the FDA said. Sanofi’s shares were at $34.58.
Salix Pharmaceuticals Ltd. (NASDAQ: SLXP) said it expects to get formal notification from the FDA that the agency will not approve a label expansion for Xifaxan that would include treatment of non-constipation irritable bowel syndrome. The Morrisville, N.C., company says the FDA would like to review retreatment information before it will consider the application for approval. The company said it will consider next steps once it gets formal notification from the agency. Xifaxan is currently approved for reduction in risk of overt hepatic encephalopathy recurrence in patients at least 18 years of age. Its shares closed Monday at $33.34.
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