National Editor

Millennium Pharmaceuticals Inc. came through with its awaited Velcade marketing deal in a big way, entering an agreement for overseas rights that gives the company $15 million up front and as much as $500 million in milestones from Ortho Biotech Products LP.

William Tanner, analyst with Leerink Swann & Co. in Boston, said the agreement is "as good as what might be expected" since Millennium is keeping U.S. rights to Velcade, the proteasome inhibitor approved by the FDA in May for multiple myeloma.

Not only that, but Ortho has agreed to help develop Velcade further - paying 40 percent of the joint development costs through 2005 and 45 percent of those costs thereafter, which could total another $500 million.

Wall Street apparently was not impressed. Millennium's stock (NASDAQ:MLNM) closed Tuesday at $14, down $1.73, or 11 percent, after falling as low as $13.53.

Keeping the U.S. rights in order to move forward independently in oncology was "the smart thing to do," Tanner told BioWorld Today, and had been Millennium's publicly stated intent.

Kenneth Bate, chief financial officer for Cambridge, Mass.-based Millennium, said investors "thought about what they wanted, but they never did put it all together and say, What do you get when you do that?'"

What you get, said Bate and Tanner, is about what Ortho, of Raritan, N.J., gave - although the development funding ought to have come as a very pleasant surprise. This is "the part people are just starting to pick up on," Bate said Tuesday afternoon.

The immediate cash take was relatively small, he acknowledged.

"What good does a slug of money up front do you, if you've got $700 million in the bank?" he said. If Millennium had not restructured recently, "we would have been in the position to get a global partner, but we would have sold the future for that," Bate added.

For the quarter ended March 31, the company had about $1.7 billion in cash, cash equivalents and marketable securities and $683.3 million in principal amount of convertible debt. As part of its march toward profitability by 2006, Millennium said in June it would cut 600 of its 2,300 employees and close plants in South San Francisco and Cambridge, UK. (See BioWorld Today, June 6, 2003.)

Under the terms of the marketing deal, when Velcade is cleared for marketing outside the U.S., Ortho (a division of New Brunswick, N.J.-based Johnson & Johnson) and its affiliate, Janssen-Cilag, will commercialize it there and pay royalties to Millennium, which has an option to co-promote in certain European countries.

Royalties were not specified but were described as "significant double digit." Tanner said he believes the range is between 20 percent and 25 percent, which would be appropriate given Velcade's approval in the U.S. and its near-approval status in Europe. Tanner said that number would mean royalty payments of between $50 million and $75 million per year at peak for the multiple myeloma indication, and Velcade is being developed for others.

Milestone payments of up to $125 million would come to Millennium upon the reaching of clinical development and regulatory progress related to multiple myeloma outside the U.S., and about another $330 million potentially is due for clinical and regulatory progress in other solid and/or hematological cancers outside the U.S.

Another $65 million in milestone payments could be reaped by Millennium if specified sales goals are reached outside the U.S.

With Ortho and its research affiliate, Johnson & Johnson Pharmaceutical Research & Development LLC, Millennium will push a global program for further clinical development of Velcade in the U.S., the European Union and Japan.

Velcade for the single indication of multiple myeloma represents only a "modest" opportunity compared to its potential, Tanner said - probably "on the order of $200 million in the 2004 to 2005 time frame" in the U.S.

"Where it could be quite attractive is the degree to which [Millennium] could generate data for solid tumors," he said. "There are some that [experts] are not enthusiastic about, and about others they are mildly encouraged."

In a research note, Tanner wrote that Leerink Swann's physician consultants believe the possibility is "remote" that Velcade will be effective in treating such tumors as renal cell carcinoma and soft-tissue sarcoma, for example.

Its stock having taken a dip on the Ortho news, Millennium could face "tougher sledding for the next few months," Tanner said.

"From time to time, and those times typically being the quarterly conference calls, there's always been some concern raised by analysts about Integrilin's growth rate and inventory levels," he said. "I'm guessing those who like to raise those issues won't miss out on the opportunity in the second-quarter call."

Tanner called the skepticism "myopic" because Millennium has more going for it than Integrilin (eptifibatide), an anti-clotting agent for acute coronary syndrome, co-promoted with Schering-Plough Corp., of Kenilworth, N.J., and acquired by way of a stock merger with COR Therapeutics Inc. valued at $2 billion. (See BioWorld Today, Dec. 7, 2001.)

Bate said the focus by some analysts on Integrilin is partly because the market for it has flattened.

"We've stayed ahead of the flattening out simply by taking [more] share," he said. "Wall Street is saying, How long can you guys keep doing that?' We've said we can't keep doing it forever."

Bate said it's "almost impossible for us to talk our way out" of the inventory suspicions, since not all of the inventory data are available in a timely way.

"The best solution is, Velcade will grow, and every dollar of sales is all ours," he said. "If we're dollar-strong on Velcade and dollar-weak on Integrilin as time goes on, people will realize we only get a fraction of that [Integrilin] dollar."

Millennium also receives royalties on Campath, a chronic lymphocytic leukemia drug developed with ILEX Oncology Inc., of San Antonio.

Bate said Velcade data have been particularly encouraging in non-Hodgkin's lymphoma.

"There was scuttlebutt a while back that we were talking about maybe a subset of patients," he said, but data "across the disease" caught the attention of specialists at a recent meeting of the American Society of Clinical Oncology.

Velcade is "very speculative in the solid tumors because there's very little data," but Bate said more are expected to be available this year.