BioSpace BioPharm Exec
Wednesday, February 25, 2009
Big Pharma's Musical Chairs

The biggest deal of the past month--and what will perhaps prove to be the biggest deal of the year--came just a little too late for inclusion in last month's issue. Pfizer's proposed acquisition of Wyeth represents not just the merger of two major pharmas, but what is really a massive biotech deal--a way for Pfizer to leapfrog ahead in a biologics race where it has traditionally been the laggard.

Wyeth dived into biotech early, when most major drug companies underestimated its potential and viewed the industry as a source of a few niche products to license on attractive terms. But Wyeth--then American Home Products--acquired Genetics Institute way back in the hazy days of 1992. In 1994 it made a major expansion into vaccines through the acquisition of American Cyanamid, its subsidiary Lederle, and its majority ownership in Immunex. The blockbuster arthritis drug Enbrel that Immunex went on to produce continues to be one of Wyeth's biggest revenue drivers to this day.

Of course, Wyeth also has conventional pharmaceuticals--the antidepressant Effexor is its top-selling products. But it is also facing a lot of the same patent expiration and pipeline productivity problems plaguing other major pharma companies.

Whether this turns out to be a good deal or not depends a lot on More...

--Karl Thiel

More By Karl Thiel

It's been a tough month for BioMarin Pharmaceutical, a darling of investors that had until recently shaken off many of the woes facing the rest of the market. But things began to turn in early January when it took an 11th-hour bet on La Jolla Pharmaceuticals' lupus drug Riquent...and subsequently lost. No big deal there; BioMarin had only put $15 million into the deal, recognizing it as a long shot. But the bad mojo already began a week before the Riquent results, when the company also saw its peripheral artery disease drug fail in phase 2. That didn't overly upset investors either, but when the third piece of bad news came in--a lukewarm projection for revenue growth in 2009--investors headed for the exits.

Wall Street has been kinder to InterMune, which reported pivotal data on pirfenidone, a potential blockbuster drug for idiopathic pulmonary fibrosis, a disease with no real current treatment. The data was mixed, but investors are counting on the desperate need for a new drug to sway regulators. -KT

InterMune, Inc. (ITMN) Lung Drug Meets Goal in Trial, Shares Rise +36% on Tuesday at Market Close

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Okay, Tom Daschle is out, but who is in as the likely nominee for Secretary of Health and Human Services? The name of Kansas Governor Kathleen Sebelius is getting a lot of buzz as the likely candidate (though some disagree). Sebelius is a popular politician and has in the past removed herself from Cabinet post consideration so she could work on problems in her home state. If she changes her mind and gets the nod, we can probably be sure that her tax records are in order. Still no definitive word on an FDA Commissioner--scrambling for a new HHS Secretary is doubtless a big distraction.

Meanwhile, GlaxoSmithKline made headlines around the world with its decision to lay off 6,000 to 10,000--a tough blow at a time when even departing Pfizer execs are seeing their severance packages significantly reduced (but still pretty darn lavish compared to us mere mortals). -KT

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It's no surprise that all those "bargains" out there have created a little tension between shopper and shoppee. Roche has gone hostile in its bid to acquire Genentech, while the latter suggests its majority owner's buyout price is about 30% too low. CV Therapeutics has said "no thanks"...twice an unsolicited bid from Astellas, which may not be going hostile simply because of an existing standstill agreement between the companies that forbids it. Avigen continues to spurn the advances of Biotechnology Value Fund while it has yet to comment on a competing offer from MediciNova. EXACT Sciences wiggled out of a hostile takeover from Sequenom by selling assets to Genzyme. It's just business--let's hope there are the minimum of raw feelings out there--but this is somewhat unfamiliar territory for the biotech industry. -KT

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The ongoing dance between Roche and Genentech is turning into a mosh pit scrum. Roche went hostile in its bid for the remaining 44% of Genentech it doesn't own, reducing its offer from $89 per share to $86.50 per share and taking it as a tender offer directly to shareholders. Genentech has asked investors to pay no attention to these missives while it thinks up its next move. It turns out, according to filings, that Genentech wanted $112 per share, based on some fairly rosy assumptions about the future, so there's a pretty big gap to bridge. Roche, more than many pharma companies, is known for playing hardball in its negotiations, but getting what it wants means raising money. Thus, a $16 billion financing that not just any old company could pull off these days. Looks like they're serious.

Meanwhile, there was actually an IPO in the last month! Mead Johnson Nutrition isn't exactly an unknown entity; it's a unit of Bristol Myers-Squibb widely known for its Enfamil infant formula, and BMS is holding onto 85% of the company. Still, it priced at the top end of its expected range and has gone up since then. That's something, isn't it? -KT

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Genentech is trying to convince Roche it is worth $112 a share, but emerging troubles with Raptiva--now a total of three confirmed and one potential case of progressive multifocal leukoencephalopathy (PML)--isn't helping its case. The European Medicines Agency has recommended suspending marketing authorization for the drug and FDA has issued a public health advisory. This isn't a critical setback to the maker of Avastin, and Biogen Idec has already tread these waters with Tysabri and proven it is possible to keep marketing approval and patient demand. But it's may strain Genentech's internal valuation models a bit. -KT

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The stakes couldn't have been much higher. With prasugrel, Eli Lilly can reinvent itself--steal the thunder from the Bristol Myers-Squibb/Sanofi-Aventis drug Plavix and take a huge chunk of a $5 billion-and-growing pie. Without it...well, Lilly could just conceivably end up as one of those "major acquisitions" other drug company execs are talking about. Good news for Indianapolis: The panel backed the antiplatelet drug, with the Cleveland Clinic's celebrity cardiologist Steve Nissen lending his support. Meanwhile, Savient lost the gout race (now there's a mental image) to Teijin and Takeda. The first new therapy in 40 years will come from the Japanese pharmas. -KT

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Karl Thiel is an analyst for The Motley Fool, a columnist for BioWorld Today, and a contributor to Nature Biotechnology. He lives in Portland, Oregon.

You may contact Karl Thiel at

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