West Coast Editor
Vaccine partner GlaxoSmithKline plc plans to buy Corixa Corp. for $300 million in cash, paying $4.40 per share - a 48 percent premium to the closing price on April 28, the day before the deal was made public.
Corixa's stock (NASDAQ:CRXA) closed Monday at $4.33, up $1.24, or 40.1 percent.
"I can't say I was expecting it, but there had been some talk on Wall Street that, given [Corixa's] market price, it would make sense for GSK to buy them," said Phil Nadeau, analyst with SG Cowen & Co. in New York.
The real thrust of the deal relates less to Corixa's Bexxar than to monophosphoryl lipid A (MPL), an adjuvant in many GSK vaccines, Nadeau affirmed. Under an agreement entered by the companies last summer, GSK would have paid Corixa $150 million in manufacturing costs - plus royalties - over the next few years, and that agreement runs through 2012.
"They're basically [using] the money they would have had to keep paying Corixa," he said.
As part of the takeover deal, GSK gets the Hamilton, Mont., facility that makes MPL, which is taken from the lipid A molecule found in Gram-negative bacteria, an immune-response regulator. One of GSK's MPL vaccines, Fendrix for hepatitis B, won approval in Europe in February.
Corixa officials could not be reached, but the Seattle-based firm's CEO Steven Gillis said in a brief conference call that the move is a "further integration of our efforts and is a logical step" for both parties. The signed deal is expected to close in the third quarter, subject to the usual approval conditions.
Late last year, Corixa sold rights to the slow-selling radiolabeled monoclonal antibody Bexxar (tositumomab, iodine-131) for non-Hodgkin's lymphoma to London-based GSK and laid off about 43 percent of its work force, or 160 people in total, dropping the burn rate to focus on its adjuvants and Toll-like receptor 4 compounds. (See BioWorld Today, Dec. 15, 2004.)
"It didn't seem like the drug would be profitable anytime soon," Nadeau said. "Our consultants are lukewarm on Bexxar. Longer term, there could be a place for it if it's ever shown to have more utility up front," but that would require more data.
Bexxar was approved in the summer of 2003 for patients with CD20-positive, follicular, non-Hodgkin's lymphoma, with or without transformation, whose disease is refractory to Rituxan (rituximab), from South San Francisco-based Genentech Inc., and has relapsed following chemotherapy. (See BioWorld Today, July 1, 2003.)
Corixa, founded in 1994 and with about 220 employees, was billing GSK in investor presentations as a "major driver of the business" before the buyout. Employees were told in a separate slide show that MPL is "a big part of the [GSK] deal." The company further told its workers that "all non-MPL Corixa programs are under review" by the overseas firm, and positions could be eliminated.
In the buyout, GSK also takes in Corixa's early stage TLR4 program, which includes agonists and antagonists, plus vaccines in the works for tuberculosis and cancer. Selected Corixa board members and their investment funds, which own about 11 percent of the outstanding voting shares, have promised to support the deal.
Nadeau told BioWorld Today the GSK deal is "an indicator, but not a strong one" that a buying mood has seized major pharmaceutical firms.
"It does seem pharma companies have a lot of money to repatriate into the U.S., if they choose," Nadeau said, but since GSK is an overseas entity taking over a domestic one, that aspect doesn't play in. The Americans Jobs Creation Act of 2004 lets firms repatriate earnings from foreign subsidiaries at a low tax rate of about 5.25 percent instead of the usual 35 percent.
Another common idea is that pharmaceutical firms have "a lot of cash sitting around that they're trying to put to work," Nadeau said. "This might be an acquisition that plays to that theme."