Biotech stocks had a quite week as gainers offset decliners, despite a big surge in most major market indexes. The week's biggest deals in the sector signified the increasing importance of the Chinese healthcare market for investors.
This article published with permission from The Burrill Report.
Two deals this week signify the increasing importance of the Chinese healthcare market for biopharmaceutical companies. Swiss biopharma Nycomed International Management GmbH acquired 51% of Guangdong Techpool Bio-Pharma Co. Ltd. for $210 million, significantly expanding its presence in China.
Nycomed gains access to a fast-growing manufacturer of biologic and protein-based drugs with international potential, and a commercialization base for Nycomed products in China. “Techpool's specialty franchise is highly complementary to Nycomed's development strategy and will become a cornerstone of our international expansion in emerging markets,” says Hakan Bjorklund, CEO of Nycomed.
Techpool specializes in the research, development, manufacturing and marketing of biologic drugs derived from natural sources. Techpool's products are sold across China and exported to a number of countries and regions, including Japan and South Korea. The company also has built a strong intellectual-property position, with 35 patents filed, of which 17 have already been granted, including one U.S. patent approval. Shanghai Pharmaceutical Group Co. Ltd., a leading Chinese pharmaceutical conglomerate, holds 41% of the shares of Techpool and previously has been the majority shareholder.
The second China-focused deal involves a partnership between Simcere Pharmaceutical Group (NYSE: SCR) and Bristol-Myers Squibb Co. (NYSE: BMY) to co-develop a preclinical therapeutic for the treatment of cancer. Under the terms of the agreement, Simcere will have exclusive rights to develop and commercialize BMS-817378 (a small molecule MET/VEGFR-2 inhibitor) in China, while New York’s Bristol-Myers will retain exclusive rights in all other markets. The partners will determine the strategic development together, which initially will be conducted by Simcere. Financial terms were not disclosed.
The partnership represents a creative approach to accelerate a preclinical oncology compound to clinical proof-of-concept by leveraging the complementary strengths of a Chinese pharmaceutical company and a global pharmaceutical company, according to Bristol-Myers. Simcere specializes in the development, manufacturing, and marketing of branded generic and proprietary pharmaceuticals in China. Simcere’s American depositary shares were trading at $8.82 Monday, while Bristol-Myers shares were at $26.44.
McKesson Corp.’s (NYSE: MCK) acquisition of privately held US Oncology Inc. was the biggest deal of the week, valued at $2.2 billion, including the assumption of debt. McKesson, a San Francisco-based healthcare services and information-technology provider, will purchase all outstanding shares of US Oncology, an integrated oncology company headquartered in The Woodlands, Texas, for cash. The deal strengthens McKesson’s solutions offerings in oncology, one of the fastest-growing segments in healthcare. The deal is expected to close by the end of the year. McKesson shares were trading at $65.81.
Elsewhere, Hungarian pharmaceutical Gedeon Richter Nyrt, acquired the oral contraceptive business of German pharma Grünenthal GmbH for $330 million in cash. The deal is a strategic fit for Richter to both strengthen its presence in Western European markets and expand its oral contraceptive product portfolio. It follows Richter’s recent acquisition of Swiss pharma PregLem. The companies have agreed to complete the technology transfer before late 2012, prior to which Grünenthal will manufacture and supply to Richter the products for all markets.
Finally, the biggest funder this week was the U.S. government, awarding more than $1 billion in grants and tax credits to hundreds of small life-sciences companies developing new therapies, diagnostics, and medical devices to treat unmet needs; prevent, detect or treat chronic or acute diseases and conditions; reduce the long-term growth of healthcare costs in the U.S.; or significantly advance the goal of curing cancer within 30 years. A full list of Qualifying Therapeutic Discover Project grant and credit recipients is available here.
In other market-moving news:
In contrast to the surging capital markets, biotech stocks had a quite week as gainers offset decliners this week. All of the sector’s top five companies by market cap finished in negative territory. Celgene Corp.’s (NASDAQ: CELG) shares fell after the Summit, N.J., company’s Vidaza drug failed to win the backing of the U.K.’s National Institute for Health and Clinical Excellence as a treatment for people with chronic myelomonocytic leukemia, acute myeloid leukemia and intermediate and high-risk myelodysplastic syndromes. Its shares were trading at $60.56.
Layoff news weighed on two Cambridge, Mass.-based biotechs. Genzyme Corp.’s (NASDAQ: GENZ) shares slid after the company said it had cut 392 positions to start the first phase of a plan to eliminate 1,000 by the end of next year. And Biogen Idec Inc. (NASDAQ: BIIB) announced a restructuring that will result in about a 15% cut in its workforce. Genzyme’s shares were at $71.21, while Biodec’s stock price was at $62.85.
MannKind Corp. (NASDAQ: MKND) shares sank in response to a lawsuit filed by John Arditi, the Valencia, Calif., company’s former chief scientific officer and vice president of worldwide regulatory affairs, which claimed that MannKind fired him in retaliation for his assertion that scientific misconduct marred clinical trials of Afrezza, its insulin-and-inhaler combination, carried out in Russia and Bulgaria. (Learn more about the suit here.) Its shares were at $5.40.
And Human Genome Sciences Inc. (NASDAQ: HGSI) was the center of a scandal on news that a physician was charged by the U.S. Securities and Exchange Commission with illegally sharing the disappointing outcome of one of the Rockville, Md., company’s clinical trials with a hedge-fund manager. The fund manager sold about six million shares of stock just before its share price plunged on the news of the outcome of the trial. Monday, its shares were at $24.60.
And shares of Cadence Pharmaceuticals Inc. (NASDAQ: CADX) of San Diego sank after the U.S. Food and Drug Administration approved Ofirmev, an intravenous pain reliever, which had been widely expected. Its shares were at $7.89 Monday after trading as high as $9 ahead of the news.
Copyright 2010 Burrill & Co. For more life-sciences news and information, visit www.burrillreport.com.