ANDRX-Reaffirm Outperform Recommendation-Gruntal Research Message Board

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Biotech / Medical : ANDRX-Reaffirm Outperform Recommendation-Gruntal Research

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To: PAUL ROBERT ST. ONGE who wrote (12)	11/14/1996 1:32:00 PM
From: James Silverman	of 23

Paul In regards to the ADRX/SEPR JV, its an interesting one although difficult to ascertain the implications on ADRX. Sepracor has already licensed a drug, fexofenadine to Marion Labs-now Hoechst Marion Rousell. Its a safer and more potent analog of the active ingredient in Seldane. Its in a twice daily formula. The drug is being marketed to fully displace Seldane. As you know Seldane had problems because of drug interactions and its slow metabolism. The drug is called Allegra and was just recently approved. Hoechst expects sales of between $400-$600M eventually. The SEPR deal with Hoechst called for royalties of 8% when all Seldane matter of composition patents expired. This was initially supposed to be 4/98. It was stretched to 4/99 by the alignment of GATT and US patents. Hoechst is trying to claim a Waxman Hatch extension to stretch it until 4/01-4/02. They are trying to get the best of both worlds. Stretch the Seldane patents several yrs and enjoy exclusivity on Allegra whose patents expire in 2014. All without delaying Allegra royalties for a few additional yrs. There is also a seperate race ongoing for patent rights to Allegra (fexofenadine) in Europe. Both SEPR and Hoechst have filed. The matter should be decided in 1997 sometime. Should SEPR win that, it is of my opinion that they will couple European rights with rights to a once daily allegra in exchange for accelerated royalties as well as possibly higher royalty rates. A potentially brilliant tactic by SEPR. Because of this, I have no clue where ADRX will eventually fit into the mix. Claritin, Allegra's main competitor is once daily, Allegra is not. For that reason o 1X daily would have great significance competitively. The timing of the introduction of once daily Allegra would be under the auspices of Hoechst which clouds the potential rollout time frame. The ADRX/SEPR from what I understand is under cost sharing agreement. I do not know what the formal agreement regarding royalties or revenue flows will be. It is very hard to say. Given ADRX is sharing costs on its development I would expect that ADRX will get half of whatever SEPR gets at best. Should ADRX receive something on the order of 5% royalties on a $500M drug, that is very significant for a co. as sm as ADRX. The question remains when. Another wildcard is the SEPR/ADRX relationship. Should this eventually lead to other SEPR drugs being applied to the ADRX technology it could be a very significant partner for ADRX. I have a high regard for SEPR and view ADRX more favorably simply because they chose ADRX to work with.

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