AFFY
(sell)
EMEA to assess safety of EPO use in oncology
The announcement that the EMEA will convene a Scientific Advisory Group on
May 15th to assess recent clinical trial results concerning EPO use in cancer
patients suggests that safety concerns are increasing in Europe, and that this
market may face similar pressures to the U.S. market. We are concerned that the
contracting worldwide opportunity for EPO in oncology may lead to a reassessment
of the current collaboration agreement by Hematide partner Takeda,
especially given the company’s focus on establishing an oncology franchise to
complement the Millennium acquisition. While Affymax’s management has
maintained that Takeda remains committed to the current terms, we believe that
the favorable financial agreement in the U.S. was partially motivated by
anticipated ex-U.S opportunities. Continued contraction of these opportunities
with increased regulatory hurdles could limit the value of Hematide to Takeda.
Terms could be pressured if opportunities/hurdles change
The Affymax/Takeda Hematide agreement provides very favorable U.S. terms for
Affymax, who will receive 50% of U.S. profits, while contributing 30% of the U.S.
development expenses (after the initial $50 Mn) and exclusive of various,
undisclosed milestone payments. We believe that these favorable terms were
partially motivated by the anticipated ex-U.S. opportunity, where Takeda pays a
royalty to Affymax, and the focus of Takeda on developing an oncology platform.
Management maintains that Takeda remains committed
Affymax management indicates that, despite Takeda’s particular interest in
oncology, the company remains committed to the Hematide development
program. However, the collaboration agreement does not have a termination
penalty incurred after 2-years from inception (mid-2006), and continued erosion of
market opportunities with increased regulatory hurdles/expenses may cause the
company to reconsider the value of this product with the current terms. Maintain
Sell. |
