West Coast Editor
Just more than a year after disclosing its plan to buy out Ascent Pediatrics Inc., thereby gaining the pediatric asthma drug Orapred and a 66-person sales force, BioMarin Pharmaceutical Inc. is laying off 58 people - mostly from that team - in response to the launch of two new generic forms of the corticosteroid.
BioMarin's stock (NASDAQ:BMRN) closed Wednesday at $7.38, up 19 cents.
The move will reduce operating expenses by about $3 million this year and by about $9 million yearly, and BioMarin has revised its 2005 revenue guidance for Orapred (prednisolone solution), as well as for the enzyme-replacement therapies Aldurazyme (laronidase) and Naglazyme (galsulfase).
Jean-Jacques Bienaime, president and CEO of BioMarin, told investors during a conference call that the company will continue to direct-market the drug and search for other ways to optimize its value, emphasizing the latest news is "entirely based on Orapred's situation," not any of BioMarin's other products.
"It's unfortunate, but we're in a managed-care world," he told BioWorld Today, noting that a large-scale study would have been necessary to beat back Orapred's generic threat, and BioMarin's resources are needed by other projects.
Like much of Wall Street, analysts at SG Cowen & Co. in New York liked the most recent move, saying in a research note that "BioMarin is positioned to outperform the market by 20-plus percent over the next 12 months to 18 months."
Guidance for all Orapred products has been revised downward from a range of $15 million to $20 million to a range of $8 million to $10 million.
The "good news of the day," Bienaime said, is that Aldurazyme for mucopolysaccharidosis I, which had been expected to sell between $60 million and $66 million, now is estimated in the range of $70 million to $75 million. Aldurazyme is partnered with Cambridge, Mass.-based Genzyme Corp.
Initial sales guidance for Naglazyme for MPS VI - approved by the FDA in late May and launched last month - is in the range of $4 million to $6 million. (See BioWorld Today, June 2, 2005.)
Efforts are ongoing to identify more Naglazyme patients, company officials said. About 250 have been located so far, of whom about 25 percent are in the U.S.
Louis Drapeau, senior vice president of finance for Novato, Calif.-based BioMarin, said the severance costs of the decision regarding Orapred will be "modest," and the company expects to have enough cash at the end of the year to operate "without significant limitations," although Bienaime said no more details will be provided until the second-quarter earnings call in early August.
As of March 31, BioMarin had about $42.7 million in cash, cash equivalents and short-term investments.
In January, Medicis Pharmaceutical Corp., of Scottsdale, Ariz., and BioMarin amended their previous agreement, in which BioMarin was to buy Medicis' subsidiary Ascent, with Orapred and the sales force. BioMarin agreed under the new terms to pay Medicis $159 million in cash and stock rather than $175 million. (See BioWorld Today, April 22, 2004.)
Bienaime, formerly CEO at Palo Alto, Calif.-based Genencor International Inc., was named to his post at BioMarin in May. He stopped short of saying the Ascent buyout was a mistake, given the fate of liquid Orapred.
"It was an expensive deal, let's put it that way," he said.
Launched in 2001, Orapred captured more than 50 percent of the share of prescriptions of liquid oral prednisolone, and BioMarin noted at the time of the Ascent takeover that the drug's patents do not expire until 2016 and beyond. In December, however, the firm recognized an "impairment loss" of about $68.3 million, mainly due to a new generic competitor to Orapred.
"There was patent protection on some of the technology, related to the taste masking," explained Joshua Grass, BioMarin's senior manager of investor and financial relations. "Unfortunately, that doesn't protect you against other prednisolone solutions."
Bienaime said better flavor matters, of course, to pediatric patients - but "payers don't really care about that. When you do a generic approval strategy, the only thing you need to show is that you're bioequivalent in healthy volunteers."
The generic product introduced late last year is the same strength and active ingredient as Orapred and is the first product that has the exact drug substance and concentration as Orapred. With an AA equivalence rating, the drug can be substituted at pharmacies without consulting the prescribing physician.
BioMarin also has rights to a pair of other prednisolone formulations that still are in development: a non-refrigerated formulation called Orapred 2, and a quick-dissolve tablet formulation that could expand the business to older pediatric patients who have difficulty swallowing.
Bienaime said company observers expected BioMarin to reduce its commercial support of Orapred solution when the generic version surfaced, hence the lack of impact on the stock, and the firm will file for approval of the oral disintegrating tablet this summer.
"When we launch it, we will not have a generic competitor," he said, adding that one might arise "but that would take a few years."
BioMarin also has Phenoptin (sapropterin hydrochloride) in Phase III trials for phenylketonuria. In May, the company entered a licensing deal valued at up to $257 million with Geneva-based Serono SA for Phenoptin and the enzyme-substitution therapy for severe forms of PKU called Phenylase (phenylalanine ammonia lyase), which is in preclinical trials. (See BioWorld Today, May 17, 2005.)