Biotech Jim,
Actually the only "fact" that I noticed that may be off is the total value of their alliances. Its actually higher than $1B after the Bayer deal. I also wouldn't exactly call them a "darling" of the stock market, given the stock performance hasn't kept up with their impressive array of alliances.
If you read the article carefully, you'll note that of the $465M from Bayer all but $115M is committed, with the last $115M being very attainable.
Thanks for passing along the FT article.
The Wall Street Journal STORY 6
09/24 Technology Journal / Health:
Bayer, Millennium in Drug-Discovery Pact
(Copyright (c) 1998, Dow Jones & Company, Inc.)
By Laura Johannes and Stephen D. Moore
Staff Reporters of The Wall Street Journal
Bayer AG, in one of the largest drug-discovery alliances ever, agreed to pay Millennium Pharmaceuticals Inc. $465 million over six years to use genetics to search for cures to diseases ranging from cancer to osteoporosis.
The agreement, which will give Bayer a 14% stake in Millennium, is a ringing endorsement of genomics techniques, which involve mining giant databases of human genes for those that may be linked to diseases. So far, few drugs have been found using this method, but the Bayer deal is the latest indication that pharmaceutical companies are counting on it to produce the next generation of blockbuster drugs.
"This is the drug-discovery method of the future," said Michael J.
Berendt, head of pharmaceutical research at Bayer's U.S. headquarters in West Haven, Conn. Bayer is based in Leverkusen, Germany.
The deal is the latest in a series of major collaborations that have propelled Millennium, of Cambridge, Mass., from a fledgling start-up to a midtier biotechnology concern over the past several years. The company announced yesterday that it expects to be profitable this year because of the cash infusion from Bayer, and its stock rose $1.4375, or 8.3%, to $18.6875 a share in Nasdaq Stock Market trading. Its market capitalization is now about $550 million.
Under terms of the deal, the German chemical and pharmaceutical
company will pay Millennium $130 million up front for the stock and
licensing fees. Millennium will issue 4.69 million shares to Bayer for
$96.6 million. Over six years, Millennium will also get $220 million in research funding and license fees. Additional payments of $115 million are contingent on its meeting the contract's goal of delivering 225 drug
"targets," or proteins that may be useful in designing drugs, to Bayer. But the money will be paid whether or not a drug actually reaches market.
"This is not one of those bogus fake biotech deals contingent on
getting everything done. This is fat cash up front," said Richard van
den Broek, an analyst at Hambrecht & Quist in New York. He added, "It's a powerful statement of how highly one company values genomics for drug discovery."
Other genomics companies yesterday saw their stocks rise on
Millennium's coattails. Myriad Genetics Inc., of Salt Lake City, saw its stock climb 48% on Nasdaq to $13.50, and Incyte Pharmaceuticals Inc., of Palo Alto, Calif., rose 8.6% to $25.25, also on Nasdaq.
Millennium said the Bayer collaboration, which involves research into cancer, osteoporosis, cardiovascular disease, pain, liver fibrosis, hematology and viral infections, leaves intact some $500 million in collaborations with other big companies that include Eli Lilly & Co., Pfizer Inc. and Hoffmann-La Roche Inc. Millennium is also free to form other alliances in unrelated disease areas.
Bayer can choose as many as 10% of the targets to use for drug
development, leaving the rest for Millennium either to develop itself or sell to a third party. However, Bayer must first be offered the right to outbid other companies. Bayer will pay royalties to Millennium on any drugs it brings to market.
Millennium uses advanced searching techniques to mine its growing
database of human genes for those that may be involved in diseases. Then it finds the protein that the gene instructs cells to make. Bayer can capitalize on these techniques by using its "library" of a million small molecules to find ones that either interfere with or enhance each protein's activity, depending on what is needed to cure a given disease. Small molecules make more convenient drugs because they can be taken orally, unlike proteins, which are so large that they must be given by injection.
Over the last several years, most of the large pharmaceutical
companies have teamed with genomics companies or academic researchers,
hoping not to be left out of the giant discoveries they expect to be
made as academic, government and corporate researchers decode the 80,000 or more genes that carry instructions to make a human being.
"There's a gene rush on out there," said Wolfgang Hartwig, head of
Bayer's pharmaceutical research. "In the next three years or so, the
entire human genome will be known, and all the really interesting
targets claimed. Companies that don't invest and secure rights to
disease-modifying gene discoveries will be shut out." |
