Editor

Transkaryotic Therapies Inc. is "one of the greatest biotech turnarounds we've seen, ever," said Christopher Raymond, analyst with Robert Baird & Co.

Think about that for a moment, while surveying last week's news: another lawsuit filed by Genzyme Corp. against TKT regarding another enzyme-replacement therapy. This time the dispute is over TKT's GA-GCB (glucocerebrosidase), in Phase I/II trials for Gaucher's disease.

Genzyme claims its patent in Israel covers novel culture processes critical in making Cerezyme (imiglucerase), approved in 1994 for Gaucher's disease, and Genzyme accuses TKT of importing and using the GA-GCB product made by those protected processes.

Last time around, the fight centered on drugs for Fabry's disease. Genzyme had Fabrazyme (agalsidase beta) and TKT had Replagal (agalsidase alfa). Ending up the ultimate loser was TKT, which won in court but gave up efforts to win FDA approval after gaining market clearance in 27 countries other than the U.S. In April 2003, the FDA gave its nod to Genzyme's drug instead.

Now, Genzyme is seeking to guard Cerezyme, which has grown in sales every year since its 1991 approval, with $219 million in the fourth quarter of 2004 and $839 million for the year - a sizeable chunk of the $2.2 billion in total Genzyme revenues.

By challenging TKT in Israel, Genzyme may hope to get better judicial results than in the U.S. with the Fabrazyme/Replagal fight here, though court action on this side of the pond is hardly out of the question.

"Genzyme, like [Amgen Inc.], will do everything it can to protect its intellectual property," Raymond noted, referring to the lengthy legal war between TKT and Amgen over erythropoietin patents.

In that case, last fall, a judge upheld four of Amgen's claims. Named in the action along with TKT, which vowed to appeal, was partner Aventis Pharma AG. TKT's Dynepo (epoetin delta), or gene-activated EPO, is being developed in the U.S. with Sanofi-Aventis Group. Amgen sells Epogen (epoetin alfa), which Johnson & Johnson markets under the trade name Procrit. Those companies have been involved in their own, separate dispute over EPO.

Back to Cerezyme and TKT's early stage GA-GCB therapy for Gaucher's. A judge has denied Genzyme's request that TKT's drug supply be seized and destroyed, and Jennifer Chao, analyst with Deutsche Bank, pointed out in a recent note that Genzyme does not own the gene, protein or manufacturing process for Cerezyme, which is made from Chinese hamster ovary cells.

What's more, Genzyme "does not appear to have a meaningful patent position" that could block TKT in the U.S., although the firm does have patents in Europe as well as Israel, Chao wrote. Raymond, though, views TKT's chances of a win in the current case as roughly equal to the chances in the Fabrazyme/Replagal skirmish.

But GA-GCB is "not a major component of their footprint," he said. "Right now, it's Replagal in Europe."

TKT recently said sales of the drug in the fourth quarter of 2004 likely will exceed $22 million, and fiscal-year sales are also expected to be higher than the guidance of $67 million to $77 million. Sales in 2005 are estimated at $90 million to $100 million, and in 2006 are likely to exceed $100 million, with final numbers to come later.

Raymond, however, maintained a "neutral" rating on TKT because of uncertainty about Replagal.

"I'm cautious," he said. "I think it's been growing nicely, but what has me a little nervous is that it appears Fabrazyme is on a steeper trajectory, and it's possible we'll see Replagal roll over and start to go in the wrong direction." Fabrazyme, he noted, has been gaining ground for some time in Europe.

TKT's investors otherwise have been focused on a possible commercialization deal for Dynepo this year (court difficulties or not), and on results expected in June from a pivotal trial with iduronate-2-sulfatase, which is TKT's infused enzyme-replacement therapy for aspects of Hunter's syndrome that are not related to the central nervous system.

Data from trials with GA-GCB - which Chao estimated could represent a market opportunity of $150 million to $200 million - also are due in the second half of this year.

Those aspects of TKT probably contributed to the "huge run-up" in share price during the past six months or so, although no new headlines appear to have contributed, Raymond said.

"People have been looking at the Dynepo opportunity," he said. The best chance to buy would have been in the fall, before shares started climbing from a price less than $14. Late last week, the stock was trading at almost $24.

"I missed it, and I'm kind of kicking myself," Raymond said. "I think it's fairly valued and I wouldn't chase it, but I wish I had that one back."

He noted TKT was "in a bit of a penalty box given what happened with prior management team," referring to Replagal's trouble in the U.S., which he blamed on a "less than optimal" pivotal trial design.

"They were responsible, whether that was right or wrong, for characterizing the relationship with the FDA as being more positive than it was," Raymond said, attributing the "great biotech turnaround" largely to the efforts of Michael Astrue, the president and CEO who came aboard in February 2003 after Richard Selden resigned.

"He was at TKT and then left, so he wasn't there when everything blew up in 2002," Raymond said. Former senior vice president of TKT and general counsel, Astrue also served as general counsel for Biogen Inc.

"Don't ask me what I'll need to see to upgrade [TKT's stock], because I don't know," Raymond told BioWorld Financial Watch. "But it seems to be a very well run organization with Mike Astrue at the helm. I think he's done a lot to bring credibility back to the story."