Scios Inc. saw its stock price surge 21.7 percent Friday on reports that it was engaged in merger talks with Johnson & Johnson - a rumored $2 billion purchase.
Scios brings to the table a marketed cardiovascular drug and an orally administered, late-stage product designed to treat rheumatoid arthritis.
"Johnson & Johnson could see a lot of value in Scios, both from its marketed product as well as the pipeline in arthritis," Jason Kantor, an analyst with WR Hambrecht & Co. in San Francisco, told BioWorld Today. He compared Johnson & Johnson's potential interest to its $4.9 billion acquisition of Centocor Inc., which brought in ReoPro, a cardiovascular product already on the market, as well as Remicade, then a developmental product and now used to treat a number of inflammatory disorders including rheumatoid arthritis. (See BioWorld Today, July 21, 1999.)
"I think they see that and say, We got that one right last time, let's do it again,' " Kantor said.
Suzanne Beveridge, Scios' senior director of investor relations and corporate communications, confirmed only that Scios and other undisclosed companies were in merger or licensing negotiations, the latter relating to partnering its p38 MAP kinase inhibitor program.
"We're in discussions with a number of companies related to various transactions," she told BioWorld Today. "But at this stage there's no deal - nothing that we can announce."
The Wall Street Journal reported in its Friday edition that the New Brunswick, N.J.-based giant is looking to fill its pipeline through the potential acquisition. The article said Johnson & Johnson would pay about $45 per Scios share, a 30 percent premium to the previous day's trading.
"We would have a fiduciary duty to explore that if companies came to us and said that they were interested in doing that," Beveridge said. "That has occurred."
Kantor said the news validates Scios' recent development efforts.
"If the speculation and rumors around the Johnson & Johnson deal are true and this gets done, then that's a great liquidity event for the company," he said. "To walk away at $45 per share is a great victory, if that's what they do."
On Thursday Scios' stock (NASDAQ:SCIO) closed at $34.69, an 89-cent uptick. But that paled in comparison to the $7.51 the shares rose Friday, closing at $42.20.
Sunnyvale, Calif.-based Scios' most advanced p38 MAP candidate, SCIO-469, is in Phase II studies to treat rheumatoid arthritis. The company said it expects next quarter to report results from the multicenter, randomized, placebo-controlled, 120-patient study.
"We thought the MAP kinase inhibitor program had a lot of value, and I think this is a validation of that," Kantor said.
Two Phase I studies demonstrated that doses in the ranges tested were well tolerated in healthy volunteers. The program also includes SCIO-323, a second-generation p38 MAP kinase inhibitor.
"Our interest is to be able to continue to develop the p38 program, particularly our lead molecules SCIO-469 and SCIO-323, to get to market as quickly as we can," Beveridge said. "We're looking for a strategic partner that can work on the clinical development program for indications such as rheumatoid arthritis - areas that would need large patient studies in multiple geographies to get regulatory approval in various countries."
Both Remiade (infliximab), sold by Johnson & Johnson through its Malvern, Pa.-based Centocor unit, and Enbrel (etanercept), marketed by Thousand Oaks, Calif.-based Amgen Inc., block the activity of tumor necrosis factor (TNF) alpha. Neither is orally administered.
The Wall Street Journal reported that talks have been ongoing for several weeks, but added that Scios also has engaged in similar discussions in recent months with other potential buyers.
Scios sells one product, Natrecor (nesiritide), approved a year and a half ago to treat acute congestive heart failure. The first in a class of new drugs called human B-type natriuretic peptides (hBNP) to be made available as a therapeutic for human disease, Natrecor sales began a day after approval. (See BioWorld Today, Aug. 14, 2001.)
For the remainder of the year, Scios said the drug generated $14.1 million in sales. For the period ended Sept. 30, Scios reported $26.1 million in quarterly sales of the drug. The company forecast yearlong sales in the range of $92 million to $95 million.
On a wider basis, Scios reported a nine-month net loss of $69.6 million - up from a year-earlier, nine-month net loss of $33.7 million. The company on Sept. 30 reported cash, cash equivalents and marketable securities of $173.1 million.
Scios' fourth-quarter and year-end earnings are due out this week.
Deeper in its pipeline, Scios has developed small-molecule inhibitors designed to block activation of the TGF-beta receptor. Scios said it would advance through preclinical development later this year two lead molecules, followed by a disclosure of the first medical indication for the new therapeutic class.