Lilly - AMEV
I have substantial problems to understand this transaction and what considerations that might have driven Lilly towards its conclusion. Opinions are welcome. Meanwhile, here is my own muddled thinking. That I know very little about AMEV and next to nothing about Lilly, I should perhaps add in self-defence.
As we all know very well no-one acquires biotech tool companies and when someone does so regardless, it is most probably a peer looking to enhance the technological "edge" and/or control ever increasing costs.
Lilly on the other hand is a typical pharma with on the surface (as evidenced by its late-stage pipeline and product line-up) little interest in anything but small molecules. We know however thanks to AMEV, that Lilly has an interest in proteins too, as AMEV is listing 5 different Lilly-originating molecules on its website. There are a number of possibilities why Lilly went into munching-mode. I don't find any one of them very convincing, but obviously I am completely wrong.
1. The technology.
A. There is a possibility that Lilly bought the company to gain access to AMEV's technology base. That does however not seem to be the case as they had already managed to license the IP for five different projects. AMEV would no doubt have welcomed more of the same.
B. Could it be possible that Lilly bought the company to prevent other from gaining the access? To me that doesn't seem very probable. The same and similar technologies appear to be available from other sources and there are anyhow so many different molecules to improve, that it would make no sense to try to make them all exclusive too Lilly. (Lilly wouldn't be able to attend to them anyhow).
C. Someone else was considering to buy the company. That is a possibility although slightly far-fetched. MedImmune might have been about to make a bid. Something that Lilly might have been unhappy about as MEDI would have gained insight into the projects that Lilly was working on.
2. Future revenue streams.
I don't see anything in AMEV's pipeline of licenced products that would become large enough to make a difference for Lilly. After all they have a market cap of 78 billion USD. Nothing that AMEV was going to make would even cause a dent in Lilly's valuation.
3. Unpartnered pipeline products.
AMEV has some interesting drugs in its preclinical pipeline. One potential Remicade-killer and one potential Rituxan-killer. But they are still preclinical and should not be a reason to buy the complete company.
4. Protein know-how.
Which leaves me with a general wish to expand the technological know-how within Lilly. The management might have come to the realisation that they need to boost the protein side of their development business and that acquiring AMEV might make the build-up of the necessary expertise easier to accomplish. But as is often said, scientists and management work in biotech companies because they are biotech companies and not pharmas. If bought out they might just as well look for other pastures. Not a very convincing motivation either.
Which leaves me with nothing to suggest.
I would however also like to contrast the bid for AMEV with the (non-existing) relation between Lilly and Cortex. The latter company is supposed to control a wide array of IP for the potentiation of AMPA-receptors. So extensive that no-one is supposed to develop anything in the area without obtaining a licence from Cortex.
Lilly is one of the most advanced companies as far as the clinical development of Ampakines are concerned. They even have a compound (LY451395) in a 200 person phase II trial for the AD indication.
clinicaltrials.gov
This is an indication that fits very well into Cortex's patent estate. Lilly is further working with other CNS-indications like Parkinson's where a licence from Cortex might also be required.
But so far Lilly has not done anything in order to protect their IP-position with regard to the Ampakines. Apart from losing a patent challenge in Europe. No licenses, nothing.
Cortex is actively looking for partners to leverage their IP portfolio. If the wrong company takes out a licence from Cortex for the MCI/AD area Lilly might as well say goodbye to all the work they have so far put into this area. While the Cortex CEO has indicated that he (and the board) would not have anything against selling the complete company for somewhere between 200 and 300 mUSD.
Mr. Stoll: We might be, but our business plan over the next three years says that we ought to be able to raise our market cap into the $150 to $200 million range and I think someone would have to give us an improvement above that to really get a run at us. (Interview with Roger Still in the Wall Street Transcript available at Cortex's website).
Without going into too many details an acquisition by Lilly of Cortex would in my mind have made much more sense than buying a tool-maker like AMEV. I am at a loss of understanding Lilly's priorities. Please someone, explain!
Erik |
