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The following article in today's Financial Post is not directly related to Inflazyme, but does provide a sense of the astuteness of a First Marathon Securities analyst who may have been involved in First Marathon's recent block purchase of one million shares of Inflazyme (see my post #998).
Sidebar interest is provided by the mention of Abbott Laboratories, whose involvement with Inflazyme is outlined earlier on this thread, and by general comments on biopharmaceuticals as a class of drugs.
(Financial Post - July 25)
Biotech's David a stone's throw from defeating Goliath
Depending on your perspective, Bill Gastle is either a struggling entrepreneur trying to defend himself against a low blow, or a thin-skinned businessman who sees conspiracies where they are none.
Gastle is chief executive of Microbix Biosystems Inc., a Toronto-based biotech company that last year generated respectable but unspectacular revenue of $2.8 million making biological materials known as antigens that major pharmaceutical companies use in diagnostic tests.
Recently, however, Microbix has been working on a generic version of the drug urokinase, a popular anti-clotting agent made from an enzyme extracted from human kidney cells. The U.S. market for urokinase is valued at U.S.$250 million, and even a small dose of that would boost Gastle's company into a whole new league.
Microbix began work on the project in 1994 and says it plans to file for approval with the U.S. Food and Drug Administration in the fourth quarter.
But Illinois-based Abbott Laboratories, which had revenues of U.S.$ $11.9 billion last year, is dead set against sharing the market.
Abbott's patent on urokinase expired in 1994, so it can't turn to the courts for help. But Gastle says it has taken other action.
He says Microbix had an agreement to buy the necessary kidney cells to produce urokinase from BioWhittaker Inc. of Walkerville, Md. He alleges, however, that last spring Abbott struck a deal with BioWhittaker to buy up the entire supply of the material, effectively blocking Microbix's production plans.
"It's a classic David and Goliath battle going on here," says Cameron Groome, an analyst at First Marathon Securities Inc.
It's also an increasingly popular defensive strategy employed by big pharmaceutical companies looking to scare off generics from moving in on their territory, says a drug industry lawyer who asked not to be named.
Microbix launched a suit against BioWhittaker in April, alleging breach of contract. In June, Abbott's name was added to the suit, with the more serious charge of violating U.S. antitrust laws. The case is slated to go to trial in the spring of 1999.
A spokesman for Abbott declines to comment on the case. BioWhittaker also refuses comment. However, a statement of defence filed by a firm of lawyers acting for BioWhittaker denies the allegation.
While no one is predicting a victory for either side at this point, it is clear that U.S. courts take a dim view of companies that violate U.S. antitrust laws.
So far, the courts appear to be siding with Microbix. In May, a judge granted Microbix an injunction allowing it access to the cells made by BioWhittaker.
In granting the injunction, Judge Marvin Garbis of the U.S. District court of Maryland went so far as to say the facts of the case are "very, very strongly in favor of [Microbix]." So far the injunction has not been appealed.
Julian Marlowe, an analyst at Goldman Capital Securities Ltd. in Vancouver, says Microbix has made a shrewd move in jumping into generics. Founded by Gastle in the late 1980s, the company built a name for itself in the development and manufacture of antigens for use in medical diagnostics and DNA research. It now has about 40 antigen products that it sells to some of the biggest players in the pharmaceutical industry, including Bayer AG, Centocor Inc. and Johnson & Johnson. But it's a niche business and management soon realized it wouldn't support long-term growth.
By contrast, the biogeneric business has enormous potential. Introduced in the 1970s, biopharmaceutical products like urokinase are a class of drugs made by biological rather than chemical means. But developing no-name versions of biopharmaceuticals is expensive and specialized work, and for that reason most generic companies haven't attempted to break into the business.
Only now are the first biopharmaceuticals starting to come off patent, so the opportunity to create generic versions is new.
Though some companies have started to move into the area, the field is still uncluttered. As one of the few companies with expertise, Microbix is in a good position to grab a piece of the market.
As more biopharmaceuticals come off patent, Gastle figures there will be more opportunities. Microbix is already working on a second biogeneric, though he won't say which one.
According to Marlowe, the candidates include Genentech Inc.'s Pulmozyme rDNase, used to treat cystic fibrosis, Eli Lilly & Co.'s insulin products Humulin and Humatrope, and Amgen Inc's cancer drug Neupogen.
Those four drugs had combined U.S. sales last year of more than US$1billion.
First Marathon's Groome predicts Microbix will have its generic urokinase on the market in the U.S. by late 2000. About half the revenue will go to San Francisco-based Gensia Sicor Inc., which agreed to fund development costs in exchange for marketing rights.
Groome says Microbix's new drug has the potential to take 20% of urokinase's US$250-million market, a conservative figure considering low priced generics frequently grab a lot more than that.
Based on that estimate, says Groome, the drug would generate sales of US$50 to US$60 million.
That would translate to total earnings to Microbix of about $7 million to $10 million, or 20 cents to 30 cents a share for 2001.
Last year, by contrast, the company lost $59,000. |
