West Coast Editor
Protein Design Labs Inc. agreed to buy the hospital-focused pharmaceutical firm ESP Pharma Inc. for $300 million in cash and about $175 million in stock, thereby gaining marketed products, a 75-person sales force, entry into the cardiac field - and about $14 million in ESP debt.
"The debt is modest and not really material," said James Goff, senior director of corporate communications for Fremont, Calif.-based PDL, and the deal is expected to make PDL cash-flow positive next year.
PDL's stock (NASDAQ:PDLI) closed Tuesday at $19.07, up 43 cents.
"In late 2002, when the new management team came on board, they laid out a five-year plan to take PDL to commercial stage," Goff said. "The good news today is that we have achieved that well ahead of schedule."
David Webber, managing director at First Albany Capital in New York, raised his rating on PDL from "neutral" to "buy" as a result of the planned ESP transaction, pointing out that the pharma firm recorded $90 million in sales last year from its five marketed products.
The initial number of PDL shares to be issued in the deal with ESP is about 8.9 million, with the actual number subject to upward adjustment by up to 985,000 shares and down by about as many as 806,000 shares, based on the price of PDL's stock in the period before closing.
ESP, of Edison, N.J., brings to the table Cardene IV (nicardipine hydrochloride), for short-term treatment of hypertension when oral therapy is not feasible. The compound is a patent-protected intravenous preparation of nicardipine, a dihydropyridine calcium channel blocker.
The company also sells intravenous Busulfex for use in combination with cyclophosphamide as a conditioning regimen before allogeneic hematopoietic progenitor-cell transplantation for chronic myelogenous leukemia. Also patent protected, cytotoxic Busulfex is a formulation of the alkylating agent busulfan.
Others in the ESP lineup include Ismo (isosorbide mononitrate), a long-acting nitrate for prevention of angina pectoris due to coronary artery disease; Sectra (acebutolol), a cardioselective beta blocker for chronic treatment of hypertension and ventricular arrhythmias; and Tenex (guanfacine), an oral, centrally acting alpha blocker for management of hypertension.
"We've talked about the crossroads between our therapeutic areas and the hospital," Goff noted, adding that ESP's hospital focus is "very important to the products we have in development." Of the 75 sales staffers on board at ESP, 66 are sales reps, he told BioWorld Today.
ESP, with $30 million in cash, has other products in the clinic targeting the acute-care hospital market. PDL, for its part, is working on Zenapax (daclizumab) in Phase II trials for asthma, as part of a $205 million deal with F. Hoffmann-La Roche Inc., entered in September, about a year after regaining rights from Roche to the drug in all indications except transplant rejection. Roche markets Zenapax for kidney transplant rejection. (See BioWorld Today, Sept. 17, 2004.)
Zenapax would be PDL's first fully owned product to reach the market. Next in line is Nuvion (visilizumab), in a Phase I/II trial for severe ulcerative colitis. At the meeting of the International Organization of Inflammatory Bowel Disease last March, PDL reported a strong signal of activity in both doses tested in a 32-patient Phase I study.
ESP and PDL also have reached an agreement as to a U.S.-marketed product acquisition, which is under negotiation between ESP and a third party, but that deal has not been finalized and still is confidential.
PDL said it will provide more details about the financial effect of the ESP buyout as part of a conference call regarding full-year 2004 results and guidance for the coming year, which will take place March 15.
Most recently making news in June, ESP said then it had entered an agreement to acquire from Orphan Therapeutics LLC, of Lebanon, N.J., rights to intravenous terlipressin, a drug in Phase III trials for Type I hepato-renal syndrome. ESP agreed to up-front and milestone payments, plus future royalties on net sales, in exchange for exclusive marketing and distribution rights in the U.S., its territories and Canada. Orphan Therapeutics agreed to conduct the pivotal Phase III trial, prepare the new drug application and pursue orphan drug designation in the U.S. in collaboration with ESP.
The boards of PDL and ESP, along with the shareholders of ESP, have approved the acquisition, which is subject to the usual antitrust and regulatory approvals.
Lazard, of New York, acted as financial adviser to PDL in the transaction, and SG Cowen & Co. LLC, also of New York, acted as financial adviser to ESP Pharma. The firms of DLA Piper Rudnick Gray Cary, of San Francisco, and Milbank, Tweed Hadley & McCloy LLP, of New York, served as counsel to PDL and ESP, respectively.