In connection with its June restructuring plan, Millennium Pharmaceuticals Inc. said last week that it discontinued research in the metabolic disease area, leading to the end of a collaboration with Abbott Laboratories under which Abbott bought $250 million in Millennium stock.
Millennium's move to terminate the joint deal didn't come as much of a surprise to Wall Street. Research notes released by Thomas Wei, senior research analyst with U.S. Bancorp Piper Jaffray in New York, said Millennium's clinical strength is in cardiovascular disease, inflammatory diseases and oncology, not in the metabolic area.
Also, Wei wrote that Millennium's restructuring plan suggested a strategy to eliminate early stage research and development programs. Furthermore, he said, termination of the collaboration may signal a lack of progress in accelerating the rate of new discovery in the metabolic area.
But Ken Bate, Millennium's chief financial officer, told BioWorld Today that's not the case. "The decision signals Millennium's strategy as a company to narrow its focus a bit. We're shifting resources from research to development, clinical and commercial. As we looked across all our development areas, the metabolic area - which was a great collaboration - but in the context of our restructuring, we chose to do this [terminate the deal] with Abbott."
Weeks after Millennium won FDA approval for Velcade (bortezomib), a proteasome inhibitor for multiple myeloma, the company released plans to cut about 600 jobs (out of 2,300) and to consolidate operations at its headquarters in Cambridge, Mass. The motivators behind the restructuring were Millennium's desire to focus on the commercially attractive products in its pipeline and to reach profitability by 2006. (See BioWorld Today, June 6, 2003, and May 15, 2003.)
In its 10-Q for the quarter ended June 30, Millennium reported a net loss of $107.1 million, or 36 cents per basic and diluted share, compared to a net loss of $107.7 million, or 38 cents per basic and diluted share for the three months ended June 30, 2002. Revenue increased to $121.7 million for the second quarter 2003 compared with $91.9 million for the same period in 2002. The company had $965.8 million in cash, cash equivalents and marketable securities.
Millennium said it expects to record in the third quarter approximately $15 million to $20 million in restructuring charges related to the discontinuation of metabolic research and development. The disclosure of the end of the alliance was made in the 10-Q last week.
Meanwhile, Abbott, of Abbott Park, Ill., has purchased $250 million worth of Millennium stock. The last purchase was made in March.
Bate confirmed that Abbott acquired the stock simply as part of the deal.
Abbott would not discuss restrictions on the resale of the stock, or other financial terms related to the end of the collaboration.
According to Jennifer Smoter, spokeswoman for Abbott, "The alliance was successful and it resulted in some interesting compounds. We are still committed to diabetes and obesity discovery, so we are going to continue with a significant effort. We have retained the license to targets and compounds from the collaboration and we are going to continue to independently develop those that have the most promise."
When the deal was signed in March 2001, the partners agreed to share equally in all phases of development. The plan was to advance two drugs to the clinic by 2002, and another two or three drugs every year thereafter. (See BioWorld Today, March 13, 2001.)
The first candidate to make it to Phase I was dropped at the request of Abbott. Wei's notes said there were toxicity issues with the product. Millennium is not expected to develop the product.
Smoter told BioWorld Today that Millennium owns rights to the Phase I candidate and the target.
Abbott, on the other hand, takes from the deal all the remaining research. If marketed products develop from the deal, Millennium would receive a royalty.