Friday, June 06, 2008

Deals of the Week: Industry Spokesperson?

News of Mr. Bill's demise has been greatly exaggerated. The hapless Play-Doh character, an icon from the mid-1970s "Saturday Night Live" episodes, is back, starring in a new MasterCard "Priceless" spot. Recall that despite being mutilated or squashed, the ever optimistic Mr. Bill always came back for more. Now Mastercard's ad agency sees a way to use him to tap into the current “unsureness about what’s going to happen next.” The tag line for the ad, of course, is: “Making it through the day: priceless.”

This got IN VIVO Blog thinking: could the pharma industry find a better pitchman than the Mr. Bill, who suffered the abuse of "friend" Mr. Hands and arch-nemesis Sluggo? Think about it. Vytorin's loss of market share or Chantix's and Lyrica's troubles got you saying "Oh Noooo"? Worried that Teva's got a better take on developing generics--or biologics--than your own stellar and highly paid R&D team? Embrace Mr. Bill.

Hmmm. We aren't sure if Mr. Bill's existing Mastercard contract--or a run-in with a dump-truck loaded with pills (see below)--precludes a deal with the drug industry. And given the state of DTC advertising, would this be the wisest career choice for our yellow friend with big lips? Perhaps it's better to say "Oh Yes" to Deals of the Week.

Ipsen/ Octagen; Ipsen/ Vernalis; Ipsen/ Tercica: Ipsen bulks up its R&D assets with the acquisition of endocrinology, neurology, and hematology projects, adding a bit of US commercial infrastructure to boot. We honored them with their own deals of the week banner yesterday.

Novartis/ Protez Pharmaceuticals: Novartis announced Wednesday that it was buying Protez in a deal that could be worth as much as $400 million if certain clinical milestones and commercial targets are acheived. Protez will become a stand-alone subsidiary of Novartis, maintaining its operations in Malvern, PA. The deal, for which Novartis pays $100 million up-front, is primarily centered around Protez's lead product candidate, PZ-601, an injectable antiobitic belonging to the carbapenem class that is currently in Phase II clinical trials to treat life threatening bacterial infections, including MRSA, and was originally developed by Dainippon Sumitomo Pharma Co. We admit to some head-scratching concerning this tie-up. Protez's other compounds, which are beta-lactamase inhibitors--appear to be in the earliest stages of drug development, so most of the company's value seems tied up in PZ-601. Why then go to the trouble of buying the whole company and ring-fencing it when it seems simpler to license the one drug? Oh, we know antibiotic resistance is on the upswing and that hospital-acquired bacterial infections are a potentially valuable specialist market for Big Pharma. We also know that stand-alones are de rigeur these days. (Sirtris and Millennium will retain their autonomy even though they know report to GSK and Takeda respectively.) But what's the logic behind this structure? Anyone from Protez or Novartis want to clue us in, we are all ears.

Gen-Probe/Innogenetics: It's been a little over four months since Roche succeeded in acquiring Ventana, so it's about time for another battle for a molecular diagnostics player. This time the company in the news is the Belgian diagnostic developer Innogenetics. A little more than a month ago, Solvay announced a friendly tie-up with the company. On Wednesday came news that Gen-Probe was throwing its hat into the aquisition ring, with an all cash offer worth $334 million, a 6% premium to Solvay's original 5.75-euros-per-share offer. Diagnostics used to be viewed as the lowly side-kick to more lucrative drugs, but a changing regulatory climate and a new breed of expensive molecular tests is changing that perception. Gen-Probe seems aiming to build a power-house to rival Roche, given this comment from the company's press release:

The combined entity is expected to be the largest standalone molecular
diagnostics company in the world, with pro forma 2008 sales in excess of $500million. The combined company would offer a broad range of nucleic acid and immunoassay tests to identify bacterial and viral infectious diseases, genetic and neurological disorders,transplant compatibility, and cancer. These tube- and strip-based products could be sold to a diverse group of small, medium and large customers around the world.

Still, as David Hamilton over at bnet writes, it's a risky move for Gen-Probe. The San Diego company, which had 2007 revenue of $403 million and a market valuation of more than $2.83 billion, hasn't done an acquisition since 2003 when it bought Molecular Light Technology for $11 million. And it's offer could trigger Solvay, a much larger outfit with revenues of roughly $15 billion, to up its bid. Given the weakness of the dollar to the euro currently, it's possible Gen-Probe could find itself on the losing end of the bidding war.

Elron/ Given: Elron Electronic Industries aims to buy an additional 1.46 million shares in Given Imaging, upping its stake in the capsule endoscopy company it spun out in 1998 to 48%. Our own Mary Stuart wonders: could this be the prelude to an acquisition? Maybe yes--and not necessarily by Elron, she says. Investment banks like Needham & Co. are positive on Given, and some have suggested that it’s ripe for a takeover, with Boston Scientific, Fujinon, Johnson & Johnson, Olympus, and Pentax named as suspects. Given pioneered capsule endoscopy in 2001 with its creation of an encapsulated color video camera that transmits images of previously inaccessible regions of the small intestine upon swallowing. Capsule endoscopy continues to make incursions upon conventional endoscopy: at the Digestive Disease Week meeting two weeks ago, Given presented clinical studies supporting expanded indications for its diagnostic device. With $130 million in sales projected for 2008 and full US sales and marketing rights for its device (J&J used to have a share), Given might just be at the threshold that large company acquirors like to cross. It's also unencumbered, thanks to the April settlement of patent litigation with Olympus.

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