Thursday, September 27, 2007

PSA Day 2: Buying into Biologics

AstraZeneca's $15.6 billion acquisition of MedImmune may well go down as the deal of the year. Though it has been described as overly expensive, David Mott, MedImmune's CEO who remains at the helm of the "operationally independent but strategically aligned" biologics business, begs to differ. Think of it this way, he suggested this morning at our Pharmaceutical Strategic Alliances conference: AZ paid 20% of their market cap to secure 25% of its pipeline going forward, a target for AZ's biologics output.

Still, if AZ investors had sticker shock, well, it was a seller's market. Still is. "Fully built biologics capabilities are rare," says Mott. Acquiring MedImmune gave AZ the whole biologics package; it was too late for the Big Pharma to build those capabilities through collaboration.

Building biologics expertise and capabilities piecemeal, says Mott, will be a long, slow and high-risk proposition, thanks in part to the dearth of biologics industry talent in key areas like regulatory affairs.

To get the most out of MedImmune, AZ will have to keep the group at arms length, while at the same time fostering a sort of collaborative independence in R&D as well as sales and marketing between the Big Pharma's traditional small molecule business and its biologics business--which (Cambridge Antibody Technology included) is being transferred in practice if not in geographical terms, to MedImmune.

For example, "juxtaposing the biologics commercial business with a traditional pharma primary care commercial business will help us take the best of both worlds to create a new commercial model" with a lower cost base--something in line with, instead of twice as big, as R&D costs.

Mott noted that the biggest challenge arising from the integration of MedImmune has been subsuming CAT into the organization. "CAT was in a difficult position" after AZ bought MedImmune, having been sidelined only a year after it was itself acquired by AZ to become its biologics arm, explained Mott. Becoming part of MedImmune "was not the vision that CAT had for itself." That said, "what we can do together is actually quite persuasive, and it's striking how non-overlapping" the companies' technologies and strengths really are.

Beyond bringing CAT into the MedImmune fold, the biotech is taking the lead in AZ's venture activities through its own MedImmune Ventures business, as well as ownership of AZ's existing large molecule collaborations and programs such as those with Silence Therapeutics in RNAi and Abgenix in antibody development.
We're taking a look at the state of the industry's biologics efforts in the next IN VIVO.

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