West Coast Editor
Gilead Sciences Inc. plans to pluck the steadily ripening mid-cap Myogen Inc. for about $2.5 billion, a takeover that would add the Phase III headliner ambrisentan for pulmonary arterial hypertension to Gilead's pipeline, as well as the less celebrated - but potentially at least as valuable - darusentan for resistant high blood pressure.
The definitive agreement calls for Foster City, Calif.-based Gilead to pay $52.50 for each of Myogen's outstanding shares (NASDAQ:MYOG), a 50 percent premium over Friday's closing price of $35.08. The stock ended Monday at $51.44, rising $16.36, or 46.6 percent.
John Martin, Gilead's president and CEO, defended the whopping premium during a conference call, pointing to the "scarcity value" of a product such as ambrisentan. He noted "very few interesting late-stage Phase III studies" such as ARIES 1 and ARIES 2, which tested Myogen's oral endothelin receptor antagonist.
"That dictates the premium more than anything else in this area," Martin said. "We looked at this very carefully, from a number of parameters." The deal, expected to close in the fourth quarter, would be dilutive to earnings next year and in 2008, neutral in 2009, and accretive in 2010 and beyond, Gilead officials said.
In a research note, Brett Holley, analyst with CIBC World Markets, called the price "more than fair" and characterized the merger as "strategically attractive for Gilead, given some questions about long-term growth."
The company's shares (NASDAQ:GILD) closed Monday at $64.28, down $4.49.
Myogen's oral endothelin receptor antagonist, ambrisentan, has finished two Phase III studies, ARIES 1 and ARIES 2, which will form the basis of a new drug application filing later this year. This summer, the compound gained ground in its race with Houston-based Encysive Pharmaceuticals Inc.'s Thelin (sitaxsentan) for PAH, when the FDA sent Encysive a second, delaying approvable letter. (See BioWorld Today, July 26, 2006.)
The FDA already cleared Tracleer (bosentan, Actelion Ltd.) and oral Revatio (sildenafil, Pfizer Inc.), though Tracleer - the only endothelin receptor antagonist approved so far - is the drug ambrisentan wants to beat. Tracleer sold $339 million worldwide in the first half of this year, up 49 percent.
Another compound in the game is intravenous Remodulin (treprostinil, from United Therapeutics Inc.), which signed a deal in June for the ongoing development of oral treprostinil with Supernus Pharmaceuticals Inc., which is giving UTC access to technology for making tablets.
UTC, trying to lure physicians away from Flolan (epoprostenol sodium), the PAH therapy from London-based GlaxoSmithKline plc, weakened earlier in the month as investors learned of a "dear doctor" letter noting cases of central venous line-associated Gram-negative sepsis in patients on Remodulin (a condition Flolan's label also warns about).
Another PAH therapy is inhaled Ventavis (iloprost), from CoTherix Inc., which (like Pfizer's Revatio), has been making inroads with patients who fail Tracleer.
Wall Street was less than thrilled with Myogen's potential $100 million, ex-U.S. marketing deal with GSK for ambrisentan, even though the arrangement let Myogen sell Flolan in the U.S., and thereby build its sales force and PAH presence ahead of ambrisentan's launch. (See BioWorld Today, March 8, 2006.)
Myogen's surrender of worldwide rights to ambrisentan in the GSK pact was "a little bit of a letdown" for investors, Martin acknowledged. But Myogen hired 17 salespeople as a result of the deal, and the merged company (which will integrate Myogen's employees with the Gilead staff) expects to grow the sales team to as many as 100.
Despite the crowded PAH field, ambrisentan stole the show during Monday's conference call. Resistant hypertension, darusentan's target, is "not an area where you would typically find us," Martin acknowledged.
"I think [darusentan] is an interesting asset," he said. "I'm frankly not sure exactly how we will use that kind of product," but the question is one the company can "deal with over time," he added, calling the Phase II data "very striking" and "distinct in patients who failed other therapies."
The first of two Phase III studies with darusentan, also an endothelin receptor antagonist, is enrolling, and the second will start in the fourth quarter.
Holley predicted approval of ambrisentan in the second half of next year and forecast peak sales of $400 million, while darusentan has the potential for more than $500 million in sales.