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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Icebrg who wrote (8745)	6/23/2003 10:29:43 AM
From: scaram(o)uche	Read Replies (1) \| Respond to of 52153

>> Is this a case of an extremely incompetent R&D management or a realistic appreciation of the problems of developing biotech based drugs? << Amevive.... very few foresaw that anti-TNF would be so effective. I didn't, and my background is square-on and I've followed the projects closely. R&D brought forward the first biological approved for psoriasis. They have expertise with B cell biology that is perhaps unsurpassed by any group other than Idec's. ;-)

To: Icebrg who wrote (8745)	6/23/2003 2:54:02 PM
From: Icebrg	Read Replies (2) \| Respond to of 52153

Big pharmas agreeing to big deals with biotech firms By Daniel S. Levine Silicon Valley/San Jose Business Journal Jun. 23 — Last month, Maxygen Inc. formed a broad strategic alliance with drug giant Roche worth up to $230 million. It's a reflection of the new type of partnerships being forged between biotechnology companies and pharmaceutical monoliths in ways that are more favorable to biotechs. The two will collaborate on the development and commercialization of next-generation interferon, a protein produced in the body when a virus is present that triggers production of an enzyme to fight infection. The companies will focus on developing treatments for a wide range of diseases, including hepatitis B and hepatitis C, using technology to alter genes and make interferon products that are more effective than those being marketed today. The deal, which includes initial payments, research and development funding, as well as potential milestone fees, also offers the Redwood City-based Maxygen an opportunity to share in substantial royalties and the profits of products developed through the alliance. "Certainly we are seeing a trend toward bigger bucks for earlier-stage stuff because a lot of the later-stage stuff is gone," says Steven Burrill, CEO of the San Francisco-based life science merchant bank Burrill & Co. "There's more shared-risk, shared-reward deals, and that's very attractive for biotech." Bio-pharma partnerships are hardly new. In fact, Maxygen has several collaborations with pharmaceutical companies including Aventis, InterMune, Lundbeck, ALK-Abello. But the deal does point to the changing nature of these partnerships, as pharmaceutical companies continue to worry about filling their pipelines with new products as patent expirations continue, to erode their current revenue base and their pace of product development fails to satisfy their appetite for new drugs. Such deals can help free biotechnology companies from the vagaries of the capital markets, provide important validations of their technologies and provide access to big pharma's marketing and manufacturing muscle. Tom Dietz, senior managing director at the San Francisco investment bank Pacific Growth Equities, says the trend is not so much new as it is a move back toward an earlier time, when big pharma spent freely on things that would take decades to get to market, and on economics that ultimately might not work. Now, though, while drug giants are paying big dollars for earlier-stage products, there is a more rational approach to it. "They are investing not so much in a concept as they are investing in people that have known validated targets and are generating real molecules or accessing compounds that have the characteristics of being drugs that are a first in man," Mr. Dietz says. "They are finding a happy medium. "We began with the big deals for early-stage stuff, a period of no deals, then a period of very late-stage deals. Now we're seeing a return to a balance, with the overriding theme of trying to fill that pipeline." In September, Hayward-based Kosan Biosciences Inc. signed a $220 million collaboration agreement with Roche to jointly develop and commercialize Kosan's new generation anti-cancer drug. The terms of the deal were more akin to what was typical in the industry for a later-stage product. Kosan will co-develop the drug and have the right to co-promote the product in the United States. The company will also receive a royalty stream on sales and has the opportunity to increase its equity through a buy-in at a later stage of clinical development. It can also increase its equity by co-promoting products that come out of the collaboration. When the deal was struck, analysts remarked that Kosan had negotiated terms more akin to what they would expect for a later-stage drug. Kosan itself says it had not expected to seek a partner for the drug until it was in Phase II testing, but it was able to reach terms it would seek were the drug already at that stage. "There is a dearth of good drugs out there and an unslaked thirst among the drug behemoths of the industry," says Michael Ostrach, president and chief operations officer of Kosan. "They are at a scale now that, in order to support their valuation, they need to have multiple blockbuster drugs." People familiar with the industry point to the alliance forged between South San Francisco-based Exelixis Inc. and U.K.-based GlaxoSmithKline in October 2002 as setting the new tone in this arena. That deal requires Exelixis to deliver an undisclosed number of small-molecule compounds that meet agreed-upon criteria in early Phase II clinical testing. GlaxoSmithKline will have the right to further develop those compounds and exclusive worldwide commercializing and manufacturing rights. Exelixis retains co-promotion rights in North America. As part of the deal, Exelixis received an upfront payment of $30 million. It also got an additional $14 million from the sale of stock at twice its market price at the time of the deal. The six-year agreement provides Exelixis with a minimum of $90 million in development funding and clinical and regulatory milestone payments that could range between $220 million to $350 million. GlaxoSmithKline also is providing a loan facility to the company of up to $85 million. Two years from the start of the collaboration, the companies may elect to expand that collaboration. And, under that option, the milestone payments could double in size and the development funding and the loan facility would also be significantly expanded. Some say one reason deals are growing in size and scope is because biotechnology companies are proving more adept than big pharma at producing new therapeutics. Part of that has to do with the closer ties that exist between biotechs and academia that provide a flow of cutting-edge science. But it also has to do with expectations of investors that allow biotechnology companies to lose money, but demand that pharmacology companies meet earnings goals and continue to grow. "You don't just take pharmaceutical companies and cut their research for 10 straight years and expect them to continue to deliver products," says John McCamant, editor of the Medical Technology Stock Letter. "They have an emphasis on infrastructure. "They sell like nobody's business, but you can't make your earnings every quarter and invest that heavily in research sometimes."