West Coast Editor
An alluring combination of platform and pipeline brought multiple would-be partners to Morphotek Inc.'s table before Eisai Co. Ltd. opted for an outright $325 million buyout. Nicholas Nicolaides, CEO of Exton, Pa.-based Morphotek, said he expects the merger to finish in four to six weeks, and Eisai, of Tokyo, plans to leave Morphotek intact as a free-standing concern, with no layoffs.
"When we got involved in the Series C financing [in 2004], we had already started to make the transition to develop our therapeutic antibody pipeline," Nicolaides told BioWorld Today. "It was clear in that era that there was not going to be a whole lot of value in the services business that we founded the company on, in 2000." (See BioWorld Today, Feb. 19, 2004.)
At the start of 2006, Morphotek divested its cell line evolution service business to Invitrogen Corp., of Carlsbad, Calif., keeping rights to the human Morphodoma antibody technology platform and rights to use its basic evolution platform technologies.
One of the few firms that can make fully human monoclonal antibodies in cell culture, Morphotek boasts a pair of clinical-stage drug candidates as well: MORAb 003, in Phase I/II trials for ovarian cancer, and MORAb 009, in Phase I trials for pancreatic cancer.
Nicolaides said Phase III trials with the lead candidate could begin as early as next year, but talks with Eisai will determine the course.
"As a venture-backed company, you don't have the leisure of doing multiple Phase II studies and looking at what the various pathways are," he pointed out, adding that more Phase II studies might be conducted under Morphotek's new owner.
Chris Christofferson of Menlo Park, Calif.-based Morgenthaler Ventures, which came aboard for the $26 million Series C round, told BioWorld Today that Morphotek's twin appeal "began to get the attention of big pharma and big biotechs pretty quickly. Morphotek fully owned all the assets and hadn't partnered any of them, so we turned Nick loose."
Some suitors were interested in the compounds and some in the platform.
"One company was only interested in the late-stage product," Christofferson recalled. "They were looking for short-term revenue potential, and there aren't many Phase II products around these days. Along came Eisai, and they said they were trying to establish long-term beachheads for worldwide development of antibodies."
Philip Sass, Morphotek's chief operating officer, said the firm knew early on that the technology applied to a wide variety of cell lines. The ability to immunize B cells in vitro and end up with fully human antibodies allowed Morphotek to "not worry too much" about others' intellectual property, such as South San Francisco-based Genentech Inc.'s recently troubled Cabilly patent.
In February, the U.S. Patent and Trademark Office invalidated the patent, which entitled Genentech to royalties - less than 3 cents of the firm's 2006 earnings per share of $2.16 - from sales of strong-selling products such as Synagis (palivizumab, MedImmune Inc.), Remicade (infliximab, Johnson & Johnson), Erbitux (cetuximab, Bristol-Myers Squibb Co.) and Humira (adalimumab, Abbott Laboratories).
Genentech is expected to appeal the patent ruling. But Morphotek need not concern itself with the outcome, thanks to solid research backing by leading academic researchers over the years. "Without them, we really wouldn't have hit this critical target," said Luigi Grasso, vice president of research and development for Morphotek.
Eisai's entry into the oncology space began with its $205 million acquisition of three cancer compounds from Ligand Pharmaceuticals Inc., of San Diego, last fall. The deal involved the marketed products Ontak (denileukin diftitox), for cutaneous T-cell lymphoma; Targretin (bexarotene) gel and capsules, also for CTCL; and Panretin (alitretinoin) gel for Kaposi's sarcoma, an AIDS-related skin cancer.
Cathy Pollini, spokeswoman for Eisai, told BioWorld Today that the strategy in acquiring Morphotek "is to look at complementing the small-molecule efforts we have in place, and potentially do a combination of the two."
Christofferson said he was pleased to see the trend exemplified by Eisai's Morphotek buyout, as the much talked-about industry consolidation goes on.
"What's happened is different than people thought," he said, adding that many, when they spoke of consolidation, meant biotech-biotech mergers. "People sort of ignored the possibility that this process could be big [pharma] companies buying the biotechs," he said.
Investors played a major role in shaping Morphotek, Christofferson said, and the decision to develop the pipeline made possible a deal that likely would not have happened if the firm had stuck with its platform alone.
"You've got to have products," he said.