BioWorld International Correspondent

Biovitrum AB has taken a significant step in its goal to become a fully integrated, specialty pharmaceutical firm focused on niche indications, with an SEK3.656 billion (US$533.1 million) cash-and-shares acquisition of Swedish Orphan International AB.

Discounting cash held by Swedish Orphan, which is debt-free, the deal is valued at SEK3.5 billion. However, its shareholders could receive another SEK425 million in an earnout payment linked to sales of one of its proprietary products, multiferon.

Stockholm, Sweden-based Biovitrum is planning to issue SEK1.7 billion worth of stock, priced at SEK59.11 per share, to fund 48 percent of the purchase, although it may issue convertible debentures to cover part of that component of the deal. The remaining 52 percent will be paid in cash, as will the SEK425 million earnout, if it is drawn down. Biovitrum, which reported SEK429 million in cash and equivalents as of Sept. 30, will raise SEK1.6 billion in a rights issue, which has been fully guaranteed by existing shareholders. It also has put in place an SEK800 million credit facility.

The deal is expected to close early next year. The combined entity will be known as Biovitrum Swedish Orphan and will have pro forma revenues of SEK2 billion for 2009. It aims to grow that to SEK5 billion by 2015.

"That will come from the current products - proprietary and in-licensed - and the product pipeline that we have," Erik Kinnman, Biovitrum's chief strategy officer and head of investor relations and public affairs, told BioWorld International. The enlarged company will have a portfolio of 60 products. "We're bringing 10; they're bringing 50," Kinnman said.

The company aims to add further growth through additional product acquisitions and in-licensing deals. "It's not a therapeutic area focus - it's the business model we want products to fit into," Kinnman said. The aim is to build Europe's leading orphan drugs player. The combined company will begin life with a pan-European sales and marketing organization of about 120 people.

Its business is built on a mix of global, European or Nordic rights for its biggest-selling products. They include recombinant Factor VIII (Refacto and albumin-free successor Xyntha), for hemophilia A; anakinra (Kineret) for treating pain and swelling in rheumatoid arthritis; nitisinone (Orfadin) for hereditary tyrosinemia Type 1; and palifermin (Kepivance) for treating oral mucositis in cancer.

It expects medium-term growth from three newer products. Multiferon (interferon), which comprises six interferon-alpha subtypes, is approved in 15 European Union states for treating advanced malignant melanoma and as second-line interferon therapy for those who are failing on existing interferon treatment. Nascobal (cyanocobalamin) is a nasal spray for treating vitamin B12 deficiency in patients with pernicious anemia. Yondelis (trabectidin), for which Swedish Orphan has marketing rights in the Nordic region and in eastern Europe, is approved in soft tissue sarcoma and in platinum-sensitive ovarian cancer.

The development pipeline comes entirely from Biovitrum. Most advanced is a long-acting Factor IX Fc fusion protein for treating hemophilia B, which is in development with Biogen Idec Inc., of Cambridge, Mass. The two firms are planning a Phase III registration trial early next year.

Biovitrum began life in 2001 as a spinout from what was then Pharmacia's Swedish organization (now part of New York-based Pfizer Inc.), with a focus on metabolic disease, biopharmaceuticals contract manufacturing and development, and blood fractionation. A series of disposals, acquisitions and licensing deals, as well as several rounds of restructuring, have substantially reshaped the business. It embarked on its present strategy two years ago. The Swedish Orphan deal marks the most significant milestone in its development since then.

"The deal has been very well received in the marketplace," Kinnman said. Shares in the company (STOCKHOLM:BVT) closed at SEK61 last Thursday, when the deal was disclosed, up SEK3 from the previous day's close.

Published  November 11, 2009