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Clinical Data Lands Buyout as Forest Makes $1.2B Viibryd Bet

BioWorld Today Assistant Managing Editor

Buyout speculation fueled by the late January approval of depression drug Viibryd (vilazodone) – not to mention last week's chatter after President and CEO Drew Fromkin cancelled his presentation at BIO CEO – ended Tuesday with a resounding thud, as Clinical Data Inc. disclosed an offer much lower than its bullish analysts had expected.

Shares of Clinical Data (NASDAQ:CLDA), which had been rising in anticipation of a buyout deal, sank $2.69 Tuesday, to close at $31.21.

The good news is that buyer Forest Laboratories Inc., which is shelling out $30 per share, or about $1.2 billion in cash up front, for the Newton, Mass.-based biotech, is a perfect home for Viibryd. Forest already markets Lexapro (escitalopram oxalate), a selective serotonin reuptake inhibitor (SSRI), which raked in sales of $586.5 million for the last three months of 2010. Viibryd could help offset declining sales of Lexapro after it starts losing patent protection next year.

Yet, shareholders of New York-based Forest weren't thrilled with the deal, either. That firm's stock (NYSE:FRX) fell $1.43, to close Tuesday at $32.90, and Piper Jaffray analyst David Amsellem called it a "Hail Mary pass [that] falls incomplete."

Given the crowded depression market and the number of generics available, "we have a difficult time envisioning blockbuster potential for Viibryd," Amsellem wrote in a research note.

After all, other branded drugs entering generic-filled markets have yielded disappointing sales, most recently Vanda Pharmaceuticals Inc.'s Fanapt (iloperidone), which gained a surprise approval in 2009 in the schizophrenia market but only recorded 2010 sales of $31.4 million despite the commercial efforts of big pharma partner Novartis AG. The Swiss pharm firm obviously feared slower-than-expected sales, since more than half of the collaboration dollars – $265 million – were tied to sales milestones. (See BioWorld Today, Oct. 14, 2009.)

Forest is hedging its bets in a similar fashion. Beyond the $30-per-share up-front payment, it agreed to pay another $6 per share if certain 12-month sales targets are hit: $1 per share if Viibryd reaches $800 million in sales within five years; $2 per share if sales meet or exceed $1.1 billion within six years; and $3 per share if sales reach at least $1.5 billion in seven years.

Though Forest also picks up rights to stress imaging agent Stedivaze (apadenoson), the value of the Clinical Data acquisition hinges solely on Viibryd's commercial potential. A dual-acting SSRI and 5HT1A partial agonist, the drug could stack up well as an alternative to traditional SSRIs and serotonin/norepinephrine reuptake inhibitors. Many patients do not respond to treatment with those drugs, and Viibryd's safety profile – fewer weight gain and sexual side effects – might prove enough of an advantage to garner a nice share of the $12 billion antidepressant market.

Edward Tenthoff, another analyst at Piper Jaffray, has maintained that its mechanism of action and safety profile make Viibryd "a differentiated asset with blockbuster potential in the hands of a big pharma partner." He has estimated peak sales of Viibryd at $1.5 billion to $2.5 billion.

In an earlier research note, Tenthoff had considered a takeout price for Clinical Data to be in the $47-per-share to $75-per-share range, assuming peak sales of Viibryd reached those heights.

Boards at both firms have approved the acquisition, set to close in the second quarter. From Clinical Data's perspective, the deal looks likely to go through, given that Chairman Randal J. Kirk and company directors own more than half the firm's outstanding shares. Still, within an hour of Forest's conference call detailing the merger, two law firms, Levi & Korsinsky LLP and Harwood Feffer LLP, launched investigations, alleging that the firm failed to shop around for the best deal. Other law firms joined the mix throughout the day.

During the conference call, Forest tried to spin its offering price as a 19.1 percent premium to the closing price the day of the FDA's approval of Viibryd. But the $30-per-share bid marked an 11.5 percent discount to Friday's closing price.

Clinical Data has been clear about the intention to put itself up for sale, citing a brief window following the nod for Viibryd. Had a buyer not emerged, the firm planned to put together its own 150-member targeted sales team initially to reach high prescribers, or roughly 30 percent of the antidepressant market. (See BioWorld Today, Jan. 25, 2011.)

As of Dec. 31, Clinical Data had $42.3 million in the bank.

Published: February 23, 2011