Those great Danes
Genmab gets little notice despite record drug pact
Friday, May 04, 2007
BY JEFF MAY
Genmab may be the biggest biotech you've never heard of.
The Danish company struck a record-setting $2.1 billion licensing deal with GlaxoSmithKline in December. Yet it still manages to fly below the radar in the United States, despite deep ties to New Jersey.
Genmab owes much of its existence to Medarex, the Princeton biotech that specializes in monoclonal antibodies. The European company licenses Medarex's core research technology, mice bio-engineered to have fully human antibo dies. Its chief executive, Lisa Dra keman, once ran business development for Medarex and is the wife of former Medarex CEO Donald Dra keman. The two companies have offices a short jog from each other.
In the past year, however, Genmab has outstripped its U.S. patron. Its stock rose 181 percent in 2006, and its market capitalization now stands at $3.1 billion, while Medarex's is $1.8 billion. Another comparison: ImClone Systems, with a far higher profile and a steady selling cancer drug in its quiver, has a market cap of $3.76 billion.
Much of the excitement over Genmab involves HuMax-CD20, an antibody Glaxo agreed to license for $460 million upfront, with total payments of up to $2.1 billion. The treatment, which analysts describe as a potential blockbuster, is in late-stage trials for bone marrow cancer, non-Hodgkin's lymphoma and rheumatoid arthritis.
Genmab spent the latter part of 2006 fielding offers from 15 to 20 suitors for HuMax-CD20, Lisa Dra keman said in an interview. The total value of the licensing deal eclipsed the $2 billion Bristol-Myers Squibb offered to license ImClone's cancer drug Erbitux.
"We had high hopes," Drake man said. "We certainly didn't say at the beginning we should set a record."
Genmab chose Glaxo because of its selling acumen and flexibility, among other qualities, Drakeman said. It had previously partnered with Germany's Merck Serono on a late-stage antibody for autoim mune diseases, HuMax-CD4, and is looking for a partner for HuMax- EGFr, a head and neck cancer therapy. All told, the company has six antibodies in clinical trials, and roughly three times that amount in its preclinical pipeline.
Although its headquarters are in Copenhagen, Genmab's U.S. offices in Princeton will be expanding this fall, Drakeman said. The space is designed with elements of Nordic style: curving walls, light wood tones and a glassed-in cafeteria that serves hot, catered lunches -- a nod to European norms for the workplace. Genmab employees typically start with three weeks of vacation, or a week more than the average for entry-level U.S. workers.
The Glaxo deal more than doubles Genmab's cash on hand to $760 million, and the company could make an acquisition of a smaller, private firm that would complement the business, Drake man said. The company is already vetting offers for HuMax-EGFr, which are expected to be substantial but not as rich as the Glaxo deal.
"We believe Genmab continues to have considerable interest from potential licensing partners and is likely to be positioning HuMax- EGF as a potential 'best in class' antibody in discussions,'" Sally Bennett, an analyst for Piper Jaf fray, wrote in a report last month. Bennett, who had an "outperform" rating on Genmab, has since left the company.
Drakeman and a few other Genmab executives split time between New Jersey and Denmark. It makes sense to have a foot in both camps. On the one hand, the United States is still the capital of the biotech industry. On the other, Genmab has far more visibility in Europe, where 14 analysts track its progress.
Genmab's board reflects its international approach. There are three Americans, including Princeton University economist Burton Malkiel, three Danes and one German.
It is a good time for a Danish company to have momentum. In the past few months, the European biotech index has outperformed its U.S. counterpart, Drakeman said.
"I think we're getting plenty of attention," she said.
One promising technology the company recently developed is Unibody, a way of using a fragment of an antibody to treat diseases. Employing a smaller piece can stop the body's immune system from kicking in and killing a cell, which can be useful in some inflammatory and cancer treatments. If it proves successful, the company plans to license it to other researchers.
"Our scientists basically in vented this technology at nights on the weekend," Drakeman said.
Genmab's bonds to Medarex have loosened in the past year. Donald Drakeman stepped down as Medarex's CEO in November in the wake of a backdated stock op tion probe. And Medarex recently sold 2.5 million shares it held in Genmab, reducing its stake in the company to less than 11 percent. At one point a few years ago, Me darex held a 44 percent interest in Genmab.
Irwin Lerner, chairman and interim CEO of Medarex, tips his hat to Genmab and Lisa Drakeman, whom he has known for years.
"I think they've been very successful in moving a couple of compounds into late-stage trials," he said.
Lerner said he thinks Medarex is undervalued, and can't explain the disparity between the two companies. But he said the Glaxo-Genmab deal will help biotechs, including Medarex, command richer deals going forward.
"I think it's a tipping point for the entire biopharma industry," he said.
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