Genzyme Corp. entered an agreement to acquire SangStat Medical Corp. for about $600 million in cash, or $22.50 per outstanding share, thus gaining a marketed product for organ rejection plus a pipeline regarded by both companies as complementary.
"The main connect is in the pipeline," Genzyme spokesman Dan Quinn told BioWorld Today, referring to SangStat's anti-inflammatory peptide RDP58 for gastrointestinal diseases and Genzyme's CAT-192 for sclerosis, among other product candidates. "Immune-mediated diseases [IMDs] are something we've been working on at the research level for quite a number of years, and this [deal] is the next step in that."
Cambridge, Mass.-based Genzyme said the buyout will be neutral or modestly accretive through 2004 and accretive beyond that, on an adjusted earnings basis excluding amortization.
Genzyme's stock (NASDAQ:GENZ) dipped $1.66 Monday, to close at $47.62. SangStat's (NASDAQ:SANG) rocketed up $6.76, or 43.7 percent, to end the day at $22.23.
Under the terms, Genzyme will make an all-cash tender offer. The $22.50 amount is a premium of about 45 percent to the Aug. 1 closing price of SangStat's shares. Boards of both companies have approved the deal, which is expected to be completed in early September.
SangStat's lead product is the anti-thymocyte globulin Thymoglobulin, a polyclonal antibody sold in the U.S. as a suppressant of the immune system for acute rejection in renal transplant patients. The firm's revenues of $120 million in 2002 generated earnings of 24 cents per share.
In many European countries, Thymoglobulin is approved for induction and treatment in solid organ transplants and in some territories for graft-vs.-host disease, as well as for aplastic anemia. For the latter indication, in Japan and certain other countries SangStat markets an equine anti-thymocyte globulin called Lymphoglobuline, which also is indicated for prevention and treatment of graft rejection.
Global sales of the two products have grown steadily since Thymoglobulin was launched in the U.S. in 1999, reaching $77.4 million last year. Growth of the lead product has been helped recently by its increased use as induction therapy at the time of kidney transplant, and Genzyme is targeting a broader indication in the U.S., while expanding sales in Europe and Latin America.
"The near-term synergy is clearly [related to] Thymoglobulin," said Bill Martin, director of corporate communications for SangStat.
"We have to be so careful about the resources we spend for development, because we're profitable," he added, and Genzyme's financial clout will help expand markets for the drug.
The FDA has given Fremont, Calif.-based SangStat clearance for two investigational drug applications to begin new studies of Thymoglobulin in living donor kidney transplant patients and in bone marrow transplantation.
SangStat also promotes Gengraf, a generic cyclosporine co-marketed with Abbott Laboratories, of Abbott Park, Ill., and sold by the same force as Thymoglobulin - a team focused mainly on the top 100 organ transplant centers that account for about 75 percent of kidney transplants. That's another fit with Genzyme, which has a renal business focused on Renagel (sevelamer hydrochloride), a phosphate binder for patients with end-stage renal disease on hemodialysis.
Renagel recently helped Genzyme to another satisfying financial quarter, with revenues for its Genzyme General unit rising 30 percent over the previous year to $347.7 million. Sales of Renagel jumped 67 percent to $66 million. Genzyme's enzyme-replacement business includes Cerezyme (imiglucerase for injection) for Type I Gaucher's disease, which pulled down $184.7 million, and Fabrazyme (agalsidase beta), which garnered $15.4 million in the quarter. (See BioWorld Today, July 17, 2003.)
But the main synergy, Quinn said, lies in the IMDs.
RDP58, SangStat's inhibitor of tumor necrosis factor-alpha, interferon-gamma, interleukin-12 and IL-2, recently yielded positive Phase II data. The company recently said partnership talks were under way to develop the drug in various gastrointestinal conditions.
"We're going to continue those discussions," Quinn said, adding that SangStat has "a lot of earlier-stage stuff" in the same area.
Genzyme's CAT-192, a human anti-transforming growth factor-beta monoclonal antibody, is being tested in a Phase II trial with UK-based partner Cambridge Antibody Technology Group plc for the treatment of diffuse systemic sclerosis - and Genzyme has more in IMDs.
"We have a product candidate we're looking to develop for multiple sclerosis, with a clinical trial by the end of this year, and we have one for pulmonary fibrosis that will enter a clinical trial next year," Quinn said.
Those are, respectively, GENZ 29155 and GC 1008. The latter also is partnered with CAT, and Genzyme noted that SangStat's RDP58 has shown preclinical promise for pulmonary fibrosis as well.
"We've said for a long time that we think this is an area with very high growth potential," Quinn said.
Down the road, SangStat's Martin said, his company's $45 million deal with Sunnyvale, Calif.-based Therapeutic Human Polyclonals Inc. is expected to provide even more value. (See BioWorld Today, Nov. 12, 2002.)
THP, founded and run by SangStat's former head of discovery and research, aims to create a production herd of genetically engineered rabbits within the next year and a half to two years, yielding humanized polyclonal antibodies that could create a "medical revolution like we saw when monoclonal antibodies were first humanized," Martin said.
"Genzyme has a really robust antigen discovery program, and these should really dovetail very nicely," he added.