Editor

You don't hear the term "overnight sensation" much in biotechnology (in fact, you don't hear it much at all, now that variety show host Ed Sullivan is gone), but the tag seems just right for Alkermes Inc. even if those who know him might have difficulty imagining CEO Richard Pops onstage with a microphone, belting out tunes.

The drug delivery company began singing a new and more expansive song, disclosing its $934 million agreement to buy the 81 percent of Reliant Pharmaceuticals LLC that Alkermes doesn't already own.

By doing so, Alkermes becomes, rather suddenly, a specialty pharmaceutical firm, with a deep pipeline that caused S.G. Cowen Securities to use the neon-lighted "overnight sensation" phrase in a research note about the company.

It's deserved. As Reliant, with a sales force of about 750, becomes a wholly owned subsidiary of Alkermes, it brings three brands Lescol (fluvastatin sodium), DynaCirc (israpidine) and Axid (nizatidine) and five marketed products that earned $277 million last year.

Lescol and Lescol XL, extended-release tablets developed by Novartis AG, are for statin-based cholesterol management. DynaCirc and DynaCirc CR, extended-release formulations also developed by Novartis for the treatment of hypertension, are calcium channel blockers. Axid, developed by Eli Lilly and Co., is an H2-histamine blocker for gastroesophageal reflux disease and peptic ulcers.

Reliant is also at work reformulating several marketed compounds, and recently acquired North American rights to MIV-606, an antiviral in Phase II trials developed by Stockholm, Sweden-based Medivir AB for herpes zoster.

Robert Hazlett, senior research analyst with Robertson Stephens, called the deal for Alkermes "a one-step transformation, moving from a biotech/drug delivery company to a pharmaceutical company. It's not fully integrated yet, and we expect that might take a couple of quarters," he added.

Alkermes brings to the table ProLease and Medisorb delivery methods designed to provide controlled, sustained release of injectable drugs for several days to several weeks and its AIR dry powder technology, which uses microparticles that are "large" geometrically but small in the aerodynamic sense for delivery of drugs to the lungs. AIR is suited to small-molecule, peptide and protein compounds, as well as other macromolecular drugs.

Earlier this month, Alkermes began a pivotal, 400-patient Phase III trial to study the safety and efficacy of once-monthly repeated injectable doses of Vivitrex for alcohol dependency. The drug is an injectable extended-release formulation of naltrexone, now sold as an oral dosage.

The firm's pipeline also includes Nutropin Depot, marketed with Genentech Inc., which is a long-acting form of human growth hormone approved to treat pediatric growth deficiencies. The compound is in Phase III trials for adults.

Alkermes, with the Johnson & Johnson unit Janssen Pharmaceutica Products LP, developed Risperdal Consta, a long-acting injectable formulation of the antipsychotic drug, and filed in September for FDA approval. The same month, Alkermes finished its first clinical trial in a plan to develop advanced formulations of GlaxoSmithKline plc's respiratory drugs.

In the spring of last year, Alkermes teamed up with Lilly to use AIR with short-acting and long-acting insulin. And in the fall, the company joined with Bioject Medical Technologies Inc., another delivery firm, to develop up to three drugs as products for Alkermes, using Bioject's Iject and maybe others of the company's needle-free systems, which force medication through the skin at high speed.

The relationship with Reliant began in December, when Alkermes entered a partnership through which the former would market undisclosed Alkermes products in return for a $100 million equity investment that gave Alkermes 19 percent of Reliant.

Under the terms of the more recently disclosed merger, Alkermes will issue 31 million shares, which amounts to 31 percent of the new company's outstanding shares. Alkermes keeps Pops as CEO, and Reliant's president remains Joseph Krivulka.

During a meeting with analysts April 2, management didn't offer any detailed guidance regarding revenue and earnings, but said it expects profitability for the combined company in 2004.

The deal most likely will let Alkermes forge ahead with stalled products for primary markets, where it couldn't support them before "That's where the money is made," Hazlett noted and will allow for Reliant's salespeople to push Vivitrex, when it's launched, and other drugs. Alkermes also can do more in-licensing, now that it has more sales and marketing oomph.

"I'm not trying to be Pollyannaish [about the deal]," Hazlett told BioWorld Financial Watch.

"I don't think the initial reaction has been to take a look at the positioning of Lescol within the statin market," particularly with regard to comparing pharmacokinetics and toxicity among competitors, he said. "That takes some doing, and the knee-jerk reaction may ultimately be incorrect," Hazlett added, pointing to the slide in Alkermes' stock since the Reliant buyout was disclosed. Shares were trading around $23 late last week; Alkermes' 52-week high is $37.75.

"In the near term, [the companies] need to do some work, and we need to help them out in that regard," Hazlett said.

The strengths of Lescol, "a workhorse of a product" with its extended-release twin, "shouldn't be lost on any investor," Hazlett said. "Lescol is going to be the backbone of Reliant for a number of years."

He pegged Reliant's revenues from Lescol from 2001 to 2004, respectively, at $50 million, $150 million, $250 million and $300 million. Prescriptions will rise, as will market share in the statin class overall at least until Crestor (rosuvastatin), AstraZeneca plc's HMG-COA reductase inhibitor, hits the market this year. Crestor also will be up against the likes of Merck & Co.'s Zocor (simvastatin) and Lipitor (atorvastatin) from Warner-Lambert Co., now Pfizer Inc.

With the changes it undergoes by teaming up with Reliant, Alkermes faces a new set of challenges, Hazlett said.

"How will Lescol XL weather the Crestor launch? That's a different kind of risk than, 'Is the drug going to get through Phase II?'" he said. "Do we believe Lescol XL can be successful, given the position in the market? We think yes. We don't expect Crestor to come in and be the lowest-cost statin on the market."

Liver toxicity is "always an issue with these types of drugs," Hazlett said, adding that Lescol's good record in this regard will "continue to resonate in the medical community."

The Reliant drug "hasn't had that much time on the market, but Lescol XL took over the positioning of solid efficacy at low cost. That's where Baycol was."

Baycol (cerivastatin), from Bayer Pharmaceuticals Inc., was withdrawn by Bayer in August of last year after reports of sometimes fatal rhabdomyolysis, a severe muscle adverse reaction that Hazlett called "the toxicity du jour."

Although it might not be said that Alkermes' way of going about things represents a trend, "if you broaden your definitions slightly, you can get a bigger picture," Hazlett said, comparing it to Millennium Pharmaceutical Inc.'s $2 billion merger with COR Therapeutics Inc., and with ALZA Corp., merged with J&J.

"What Alkermes is trying to evolve into is really a commercial organization as well as a research-based organization, and there are a number of different ways to get there," he said, adding that "you could [also] make the case that Elan is a success, near-term problems notwithstanding. It has grown in much the same way, but ALZA in particular did a good job of selecting specific markets and going after them."

Framing the Alkermes deal with Reliant along such lines might be a challenging sell, but Hazlett insists it will happen with time.

"You have to be a little bit realistic," he said. "Some investors may not understand what you are trying to accomplish immediately. Quite frankly, Alkermes needs to continue to talk about it. That's part of the game."