Editor

"I'm not gonna pay a lot for this muffler!" splutters the exasperated customer in the bygone TV ad, showing a mood possibly similar to that of Millennium Pharmaceuticals Inc., which turned its back on a planned buyout of AnorMED Inc., and let rival bidder Genzyme Corp. take the gold.

But maybe "gold" isn't the right word.

AnorMED agreed to let Genzyme take over the firm for $13.50 per outstanding share, or about $580 million, shortly after Millennium refused to go higher than its $12-per-share offer. Genzyme earlier had offered $8.55. Last week, AnorMED and Genzyme entered a mutually beneficial support agreement regarding the acquisition at the higher price. Both boards have approved, and the deal could close in November.

At a certain point, the two-party auction threatened to turn into a scenario in which the person in back keeps raising a hand, and someone in front ends up forking over way more than the painting is worth. Millennium's bargainers, though, steeled their resolve when the numbers climbed and bowed out. So, who really won?

"When the last chapter is written, folks will look at this as a pretty interesting, smart little deal by [officials at] Millennium," said Christopher Raymond, analyst with Robert Baird & Co. "They dodged a bullet" - and collected $19.5 million, the agreed-upon breakup fee.

AnorMED has a single product, the stem cell mobilizer Mozobil (also known as AMD3100), in Phase III trials for use during bone-marrow transplants as therapy for blood cancers. The small molecule CXCR4 chemokine antagonist spurs the release of stem cells from bone marrow into circulation.

Results are due next year from two registration-enabling trials testing Mozobil with the current standard of care for stem-cell mobilization, granulocyte-colony stimulating factor (G-CSF), compared to placebo with G-CSF in multiple myeloma and non-Hodgkin's lymphoma patients.

But this is a niche market that grows ever narrower, Raymond said. About 30,000 autologous stem-cell procedures are done in the U.S. and Europe yearly. Over the past three years, he said, the trend has been "flat to down slightly [for autologous transplants] in MM, in terms of patients put on induction therapy, with the ultimate goal to transplant them. It started in the mid-30 percent range and has gone to the low 30 percent."

Better therapies have pushed the method somewhat to the side, such as Revlimid (lenalidomide) from Celgene Corp., Millennium's own Velcade "and Thalomid [thalidomide, also from Celgene] for that matter, in terms of figuring out how to dose," he said.

The idea would be to expand the market, but AnorMED, by adding Mozobil to G-CSF, doesn't take away any of the costs of the transplant. "When you combine induction, through the actual procedure, and then recovery, the total cost of G-CSF can be close to $9,000 or $10,000, just for the G-CSF," Raymond said. "This is a very expensive procedure, still associated with a high degree of treatment-related mortality."

The number of patients who fail to do well enough on G-CSF alone, is "probably about 20 percent," he said. "The trick is figuring out which patient will be the most likely candidate."

Physicians who perform the transplants tend to be cutting-edge types, thought leaders who are most likely to investigate new approaches. "You're initially going to get a lot of excitement over [Mozobil] by physicians, Raymond said. "Generally, getting them to [prescribe it] is harder."

In April, Genzyme wanted to buy AnorMED for $8.55 per share, but the board preferred to hold out for a year, waiting for the Phase III data. Genzyme tried again in August, and the board rejected the $380 million takeover bid, after which Genzyme vowed to take the idea directly to AnorMED's shareholders.

AnorMED opened the bidding to others, in hopes of a better deal than Genzyme's, meanwhile urging shareholders not to accept the $8.55. In late September, Millennium offered $12 per share, or $515 million. Genzyme countered with $13.50 per share, after the board of both companies approved the Millennium buyout. "The list of independent, unencumbered cancer [firms] is pretty short," Raymond noted.

Rather than go higher, Millennium opted to retreat, take the $19.5 million and use the money to grow Velcade. That money adds only about 5 percent to Millennium's cash, but buying out AnorMED would have taken a huge chunk. "It would have been tough," Raymond said - and already is, somewhat.

Velcade, an oral proteasome inhibitor, first won approval in refractory/relapsed MM in May 2003, and the label since has been expanded to include second-line patients.

"Despite solid second-quarter results," wrote analyst Bret Holley with CIBC World Markets in July, "we believe upside for Millennium will be limited without evidence Velcade is effective in first-line MM, follicular non-Hodgkin's lymphoma, and/or non-small-cell lung cancer." First-line MM success "may be attainable," and interim Phase III data are expected during the December meeting of the American Society of Hematology, but NHL and NSCLC remain "unanswered questions," Holley wrote.

Meanwhile, Millennium downgraded its guidance for third-quarter Velcade revenue, predicting a lower number than the second quarter's $59 million.

Matthew Osborne, analyst with Lazard Capital Markets, noted in a research report earlier this month that experts at a discussion sponsored by the Multiple Myeloma Research Foundation often mentioned Velcade as synergistic with other therapies, including Revlimid, KOS-953 (the Hsp90 inhibitor from Kosan Biosciences Inc.), liposomal doxirubicin and NPI0052 (the proteasome inhibitor and would-be Velcade competitor from Nereus Pharmaceuticals Inc.). NPI0052 is just entering the clinic, along with another proteasome inhibitor, PR-171, from Proteolix Inc.

Osborne pointed to uncertainties, such as the impact of Revlimid and Velcade on the number of stem cell transplants (SCTs). "While MM accounts for the single most use of SCTs (5,000 per annum), effective front-line therapies may limit the role of SCT" as a treatment, he wrote. "However, Mozobil's ability to harvest stem cells continues to impress. Although patients remain blinded, the amount of cells harvested in a short time noticed in some patients is remarkable."

Remarkable enough for Genzyme to pay big for AnorMED. A decade ago, bone-marrow transplant was "a very hot field," Raymond said. "A lot of women with breast cancer were getting transplanted." In the late 1990s, investigators discovered that some of the studies backing the benefits had been falsified and the bottom fell out of the market.

"There's clear evidence it works for MM and for those who failed Rituxan [rituximab, from Genentech Inc.] in NHL," he said. "Some docs are doing it in scleroderma and children with leukemia. But it's Draconian."

Wall Street seemed to like Genzyme's AnorMED move, as the stock was rising nicely last week, but Raymond stuck to his guns. Mozobil, he said, does not fit with Genzyme's transplant agent Thymoglobulin (anti-thymocyte globulin, rabbit), which targets the solid-organ market, or with Clolar (clofarabine), marketed for pediatric refractory/relapsed acute lymphoblastic leukemia.

"This deal doesn't make me feel any better about Genzyme," because Renagel (sevelamer), a phosphate binder for patients with end-stage renal disease, grew to $134.7 million in the third quarter but faces trouble, Raymond said, from "unexpected quarters," namely Fosrenol, from Shire Pharmaceuticals Group plc, and Phoslo (calcium acetate), which Fresenius AG acquired from Nabi Pharmaceuticals.

Genzyme's first, $8.55-per-share offer for AnorMED was "more reasonable," he added, acknowledging that some of his peers are predicting $200 million in peak sales for Mozobil. "The big question is, what is that year? I think $100 million would be generous, and when that's going to be is difficult to say. It's not going to be two or three years after launch."