Washington Editor

Millennium Pharmaceuticals Inc. agreed to a $515 million premium purchase of AnorMED Inc., outbidding Genzyme Corp. for the Canadian biopharmaceutical firm and its Phase III cancer drug, Mozobil.

That product, which improves the ability to collect stem cells for transplant, represents the catalyst for the buyout.

Millennium is paying $12 per share in the deal, a 21 percent premium over the stock's (NASDAQ:ANOR) closing price on Monday and a 40 percent premium over Genzyme's previous offer that valued each AnorMED share at $8.55. As a result, the Vancouver, British Columbia-based company's shares climbed by $2.79 at the end of Tuesday's trading, a 28 percent gain to $12.74.

"This gives us the most certain value," AnorMED Chairman and interim CEO Kenneth Galbraith told BioWorld Today, "and fairly quickly."

He acknowledged that Mozobil makes up "a substantial amount" of the valuation given by Cambridge, Mass.-based Millennium. The deal equals a payment of about four times the $130 million in annual sales that some on The Street had forecast for the drug, which also is called AMD3100.

But Genzyme had higher expectations. That Cambridge, Mass.-based company had projected that annual sales could climb as high as $300 million in making its unsolicited offer for a $380 million takeover. Its proposal caused the stock to surge by 96.8 percent to $9.90, even though Galbraith indicated that the company would not go for it. (See BioWorld Today, Aug. 31, 2006.)

Both Genzyme and AnorMED had been discussing a development deal around the product for almost a year, and Galbraith acknowledged that it would have fit nicely with Genzyme's transplantation franchise.

But he noted that the same thinking holds true for Millennium, a point underscored by that company's vice president of corporate communications, Lisa Adler. "From a strategic standpoint," she told BioWorld Today, "it's hand in glove on a number of different fronts."

Because Mozobil's commercialization horizon is fairly short, it is seen as a near-term complement to Millennium's Velcade (bortezomib), which is facing competition from Revlimid (lenalidomide, from Celgene Corp.).

A 2008 U.S. launch for Mozobil is being considered, subject to clinical trial success and regulatory approval, and European sales are expected to begin a year later. The product would be sold by Millennium's oncology sales force, which currently details Velcade for relapsed multiple myeloma.

Adler said that Millennium, which has been planning to make a late-stage oncology acquisition all year, has been evaluating Mozobil for the past 18 months and has been in dialogue with AnorMED throughout that time. "We have a really good sense of the data and the marketplace," she said, adding that "experience and good relationships" with the FDA would aid in navigating the product through the regulatory waters.

A small-molecule CXCR4 chemokine antagonist, Mozobil works by releasing stem cells from the bone marrow into circulation. Stem cell transplants offer a potential cure for patients with certain hematological malignancies, but at present, most of the 50,000 to 60,000 transplant-eligible patients worldwide are unable to optimize the benefit of transplant due to suboptimal stem cell collection.

Data from two registration-enabling trials are expected next year. The randomized, double-blinded trials are testing Mozobil's use 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. Patient enrollment is complete in the multiple myeloma trial and almost done in the other. Both are being conducted under the special protocol assessment process with the FDA.

Phase II data showed that 60 percent of patients who received Mozobil in combination with G-CSF collected the optimal target number of cells for transplant in two apheresis days, compared to only 16 percent of patients who received G-CSF alone. The cell yield in Mozobil patients in combination with G-CSF was on average 290 percent higher compared to that in patients on G-CSF alone.

Preclinical data suggested that Mozobil also could make patients with certain hematological diseases more responsive to chemotherapy, including those with acute myelogenous leukemia and chronic lymphocytic leukemia.

AnorMed's portfolio includes another clinical-stage product, AMD070, a small-molecule entry inhibitor in Phase I/II studies in HIV that's expected to be out-licensed. In addition, there are several preclinical compounds in development to target specific chemokine receptors in a variety of indications.

Both companies' boards have approved the agreement, under which Millennium will begin its cash tender offer within 10 days. Galbraith called the proposal "fair and appropriate," adding that the market also "seems to think it's a fair price." If a better bid comes in before then, AnorMED can back out, although Millennium has the right to match any superior offer. Should the transaction come undone, Millennium would be entitled to a termination fee of $19.5 million, under certain circumstances.

Completion of the tender offer remains subject to certain customary conditions, including shareholders tendering at least two-thirds of the outstanding common shares on a fully diluted basis and certain regulatory approvals. If the tender offer is completed, the deal would close about a month later.

Goldman, Sachs & Co. acted as AnorMED's exclusive financial adviser. JP Morgan Securities Inc. acted as Millennium's financial adviser and provided a fairness opinion to its board, and Morgan Stanley also provided advisory services.

Shares in Millennium (NASDAQ:MLNM) closed at $10.15 Tuesday, unchanged.

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