NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: DRUG ROYALTY CORPORATION INC.
TSE SYMBOL: DRI
DECEMBER 17, 1998
Drug Royalty Acquires Significant New Interest Using Two
New Financing Relationships - Latest Deal Expected To
Significantly Boost Royalty Revenues
TORONTO, ONTARIO--Drug Royalty Corporation Inc. today announced
that it has acquired from a third party, for $16 million, a
royalty interest in the worldwide sales of a major anti-cancer
drug that is expected to generate significant revenues for Drug
Royalty in 1999 and beyond. Drug Royalty received financing on the
transaction from a major bank, Royal Bank of Canada (TSE:RY),
Toronto. A US investment manager, Paul Capital Partners, Silicon
Valley, co-invested alongside Drug Royalty for a significant
undisclosed amount, making the total transaction Drug Royalty's
largest to date.
This acquisition meets three objectives set out in Drug Royalty's
strategic plan:
- It confirms a template for completing royalty acquisitions in
our target markets;
- It establishes two new relationships for non-equity
financing; and
- It puts projected 1999 royalty revenue ahead of expectation
in respect of the Company's three-year plan.
Drug Royalty has over $50 million invested in royalty interests of
which 85 percent relates to interests in two leading oncology and
immune products with worldwide sales of over US$2.3 billion, and
15 percent relates to other interests in earlier stage, innovative
technologies. Drug Royalty's stated objective is to grow its
royalty portfolio, in a diversified manner, to over $175 million
with an emphasis on acquiring current royalty streams from growing
pharmaceutical assets.
"Drug Royalty's 1999 revenues are expected to increase
significantly as a result of this latest transaction, as well as
our May 1998 acquisition of royalties from Neupogen(R) marketed by
Amgen (Nasdaq:AMGN)," said Ian Lennox, President and CEO of Drug
Royalty. "The overall transaction, including relationships with
Paul Capital and the Royal Bank, represents a significant step
forward in accelerating our growth."
Ian Lennox stated that Drug Royalty is confident that it has the
financial capacity to complete additional royalty deals in 1999
without necessarily resorting to raising equity. "We remain
committed to delivering on our strategy of building value for our
shareholders from larger royalty transactions," added Lennox.
Jim Webster, Executive Vice-President of Drug Royalty, noted that
"the bank's support in bridging part of this deal, is indicative
of the quality of this transaction and our ability to respond
without resorting to equity markets." Drug Royalty used a portion
of its existing cash and part of a $10 million credit facility
from the Royal Bank, to complete the acquisition. "I anticipate
being in a position to repay this facility in full if we wish, in
early 1999, from the significant royalty cash flows from this new
interest and the Neupogen royalties," added Webster.
Webster also noted that Drug Royalty secured a co-investor, Paul
Capital Partners, for the balance of the transaction not taken up
by Drug Royalty. "We are pleased that Paul Capital recognized
the underlying value of this royalty interest and partnered with
us," said Webster. David E. Park, a senior partner of Paul Capital
stated, "We have developed a solid relationship with and respect
for the management of Drug Royalty on this transaction and we wish
to work closely with them in the future."
Paul Capital Partners acquires private equity assets in the
secondary market. Since its founding in 1991, Paul Capital has
completed over 75 transactions worth over $1 billion.
Drug Royalty provides shareholders with a means of participating
in the global life sciences industry by creating and acquiring
royalty interests in pharmaceuticals. Drug Royalty is
implementing its strategy through:
- creating new royalty contracts by providing funds to life
science companies in return for royalties;
- acquiring existing royalty streams from public institutions,
inventors or companies; and
- acquiring intellectual property rights which can be licensed for
royalties.
Drug Royalty's common shares trade on The Toronto Stock Exchange
under the symbol DRI. This release and other information about
Drug Royalty Corporation Inc. can be found on their website at
www.drugroyalty.com, or directly from:
/T/
Ian Lennox or Jim Webster
President & CEO Executive Vice-President
Drug Royalty Corporation Inc. Drug Royalty Corporation Inc.
(416) 863-1865 ext.234 (416) 863-1865 ext.225
(416) 863-5161 (FAX) (416) 863-5161 (FAX)
ianl@drugroyalty.com jimw@drugroyalty.com
/T/
Certain statements in this press release are forward-looking. Such
forward-looking statements regard Drug Royalty Corporation Inc.'s
future performance and involve various risks and uncertainties.
There can be no assurance that such statements will prove to be
accurate, and actual risks and future events could differ
materially from those anticipated in such statements. Risk factors
are listed from time to time in Drug Royalty Corporation Inc.'s
public disclosure documents filed with The Toronto Stock Exchange
and provincial securities commissions. Drug Royalty Corporation
Inc. assumes no obligation to update the information contained in
this press release.
BACKGROUND ON PACLITAXEL: ANTI-CANCER DRUG
-------------------------------------------
Overview
Paclitaxel is considered one of the most important drugs to emerge
in cancer treatment in the last ten years. It is widely used today
in combination therapy for a wide variety of advanced cancers
including treatment of breast, ovarian and non-small cell lung
cancer(1). Lung cancer is the leading cancer cause of death in the
United States(2).
To date, paclitaxel has been primarily developed and
commercialized by the world's leading oncology company,
Bristol-Myers Squibb ("BMS") and marketed under the brand name
Taxol(R). It is the single largest selling oncology drug in the
world with estimated 1998 sales of US$1.2 billion, up 23 percent
over the prior year(3). About two-thirds of Taxol sales come from
the US market.
Paclitaxel was first approved in the US for the treatment of
ovarian cancer in 1992(4) and for breast cancer in 1994. In 1997,
paclitaxel was approved in the US for second-line treatment of
AIDS-related Kaposi's sarcoma. In mid-1998, it was approved for
the treatment of non-small cell lung cancer in the US and Europe.
We expect that such new indications, particularly in combination
with other treatments, will continue to significantly grow demand
for the drug(3).
BMS has received numerous patents relating to the administration
and processing of the drug which do not expire for up to fifteen
years depending on the jurisdiction and the particular patent. It
is believed that, depending upon successful patent litigation
against BMS, the earliest that generic competition could enter the
European and US markets is in 2003 and 2000, respectively. BMS has
brought legal action against a number of potential generic
competitors in defense of its patents.
Drug Royalty can participate in the growth of paclitaxel from both
the patented and generic versions. Drug Royalty will earn a share
of royalties received by a major US public institution that has a
license agreement with BMS. In addition, Drug Royalty earns
royalties from Phytogen Life Sciences Inc. which has a paclitaxel
manufacturing facility in Delta, B.C. that recently received
regulatory approval from the FDA and HPB. In 1995 and 1997, Drug
Royalty provided royalty-based financing to Phytogen for a total
of $4.5 million. In 1996, Mylan Laboratories Inc. entered into a
license and supply agreement for paclitaxel with Phytogen Life
Sciences Inc. for North America.
Generic Competition to Expand Market
It is anticipated that when competitors successfully introduce
generic formulations, the paclitaxel market will significantly
expand in volume terms because demand for the drug is currently
constrained due to the high cost per treatment paid by hospitals
and managed care organizations. Such an increase is expected to
mitigate the effects of price discounting on the value of the
overall market. A small number of companies are working to
introduce generic forms of paclitaxel, including two leading
generic companies, Mylan Laboratories Inc. and IVAX Corp.
(AMEX:IVX) in the US.
Growth Potential from Clinical Development
Researchers are studying paclitaxel's effectiveness if used to
treat breast and ovarian cancer earlier in the course of the
diseases and, if demonstrated, this could significantly expand its
usage(9). Clinical trials of some new drugs such as Genentech's
(NYSE:GNE) Herceptin(R), have also demonstrated that when used in
combination with paclitaxel, the combination has greater
efficacy(5). The National Cancer Institute ("NCI") is currently
conducting 130 clinical trials, including 23 Phase III trials.
Phase III trials include: small cell lung cancer, first line
treatment of breast cancer, and cancers of the bladder, prostate,
esophagus, head and neck, cervix and endometrium(6).
Side-Effect Profile and Mode of Action
According to the NCI, paclitaxel's anti-tumor activity was
discovered in the 1960s during a large-scale plant-screening
program sponsored by the NCI. Interest in developing the drug
increased in 1979 after scientists found that paclitaxel had a
unique mechanism for preventing the growth of cancer cells: it
affects the fiber-like structures called microtubules, which play
an important role in cell division and other important cell
functions. A large number of cell microtubules are formed at the
start of cell division, and as cell division comes to an end,
these microtubules are normally broken down. Unlike other drugs,
paclitaxel binds itself to the microtubules and prevents them from
breaking down. In the presence of this drug, cancer cells, which
attempt to divide frequently, become so clogged with microtubules
that they cease to grow and divide(7).
Paclitaxel's most toxic side effect is depression of bone marrow,
which in turn diminishes the body's ability to produce the white
blood cells that fight infection. Drugs such as Neupogen(R),
marketed by Amgen, are used by oncologists to boost the immune
system to fight infection in cancer patients. Other side effects
would include reversible hair loss, gastrointestinal problems and
nerve damage. However, the risks associated with paclitaxel are
far outweighed by the drug's potential benefits(4),(7),(8).
The information provided in this news release has been obtained
from sources that we believe to be reliable, but we do not
represent that they are accurate or complete, and they should not
be relied on as such.
--------------------
/T/
(1) Bristol-Myers Squibb Company - 1997 Annual Report
(2) American Cancer Society - Cancer Facts and Figures 1998
(3) Cancer Treatments - Med Ad News, V17, N5, P68, May 1998
(4) The Medicine Market, Sunday, May 31, 1998
(5) SG Cowen Perspectives October 1998 - Pharmaceutical Therapeutic
Categories Outlook - Page 10
(6) National Cancer Institute - PDQ Clinical Trial Search
(7) National Cancer Institute - NCI Fact Sheet: Paclitaxel
(8) Paclitaxel - Rx Lists Monographs
(9) National Cancer Institute - Cancer Facts - Paclitaxel (Taxol,
Registered Trademark) and Related Anticancer Drugs, October
22, 1998
/T/
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FOR FURTHER INFORMATION PLEASE CONTACT:
Drug Royalty Corporation Inc.
Ian Lennox
President & CEO
(416) 863-1865 ext.234
(416) 863-5161 (FAX)
ianl@drugroyalty.com
or
Drug Royalty Corporation Inc.
Jim Webster
Executive Vice-President
(416) 863-1865 ext.225
(416) 863-5161 (FAX) (FAX)
jimw@drugroyalty.com
INDUSTRY: MTC
SUBJECT: NWS
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