By Randall Osborne

West Coast Editor

For a few years, each time a company would buy out another, some industry boosters ballyhooed the "consolidation" of the "maturing" biotechnology sector.

It was a sign of the growing savvy among business leaders, they said, not to mention a sign of the sober realization by certain, less advantaged firms that they'd be better off under the auspices of more powerful (or at least more promising) brethren.

But the indicators weren't always convincing to everybody. Often enough, they were marriages between companies that hardly qualified as giants, and plentiful as they might have seemed, it's a relative term.

What's more, to regard the ever-volatile biotechnology industry ¿ with its reversals, failures and sudden surprises ¿ as "mature" seemed to some like something of a stretch.

Not any more.

In the month of December, mergers tumbled out hot, heavy and unprecedentedly big.

It began in the first week of the month, when MedImmune Inc. and Aviron Inc. disclosed their plan for a $1.5 billion pairing, with a $2 billion revenue target for 2006. The fact that Aviron's long-touted nasal FluMist vaccine remains stalled in the FDA didn't seem to faze MedImmune, which pointed out that, once it swallows up Aviron, the pipeline will include four products in Phase III studies, five in Phase II trials and various monoclonal antibodies and vaccines.

Another play, upping the ante, came several days later. This time, Millennium Pharmaceuticals Inc. said it was merging with COR Therapeutics Inc., in a $2 billion deal that gave Millennium a marketed product right off the bat: Integrilin, an anti-platelet drug for acute coronary syndrome. Integrilin, being studied in a load of trials for other indications, is supplemented by nine other clinical candidates.

Streamers were still flying and party horns still blowing over the Millennium/COR deal ¿ hailed as the largest ever in biotechnology ¿ when, in mid-month, Amgen Inc. declared its intent to buy Immunex Corp. for a whopping $16 billion in stock and cash. The arrangement gave Amgen (which hardly needed firepower) the blockbuster rheumatoid arthritis drug Enbrel (etanercept).

Amgen noted that competition in the RA field could loosen Enbrel's grip on the market somewhat. Abbott Laboratories Inc., of Abbott Park, Ill., offered results from a Phase II trial of its monoclonal antibody for RA, D2E7 (being developed in a partnership with Cambridge Antibody Technology plc) at a scientific meeting in November, and Pharmacia Corp. provided Phase II data at the same meeting for CDP870, a humanized, pegylated tumor necrosis factor-alpha inhibitor for RA.

"When you look at long term, the market is becoming very crowded," said Fariba Ghodsian, director of health care research at Roth Capital Partners in Los Angeles.

Enbrel joins a drug lineup that includes the anemia drug Epogen (epoetin alfa) and white blood-cell booster Neupogen (filgrastim), giving the two companies a combined market capitalization of about $81 billion. Inflammation, nephrology and oncology will be the target areas of the Amgen/Immunex merger.

"On the one hand, I would say that to have three of this size happening in three weeks, definitely sets the trend for next year," Ghodsian said. "All of them have been established companies."

On the other hand, she said, such apparent trends have been noted before ¿ albeit among smaller companies, with much lesser amounts of money ¿ and "we didn't see a lot more after that."

Regarding the situation overall, Ghodsian said, even such apparent difficulties as the potential competition in RA and the slowing of FluMist through the regulatory process won't deter companies from matching up.

"Really, the expectation is that [FluMist] will get approved soon," she said, and the Amgen/Immunex merger includes more elements than Enbrel, which "is a good drug, and Amgen wants to fully exploit that opportunity. By all standards, it's a better drug compared to Kineret [anakinra]."

Kineret is Amgen's RA drug, an interleukin-1 receptor antagonist, approved by the FDA in November.

"Obviously, Amgen is more diversified [than Immunex], so you could argue from a product pipeline standpoint that it makes sense to expand on the inflammation side," Ghodsian said. "And there is the issue of short-term dilution, in terms of earnings per share. [The merger] comes at a time when Amgen was embarking on a very high EPS growth curve, predicting 20 percent each year for next five years."

Ghodsian's question: "Why did they do it right now? They got two drugs approved, which may become major drugs" ¿ the first being Aranesp (darbepoetin alfa), given the FDA's nod in September for anemia, and the second Kineret, for which hopes are less high, she said.

"There is some overlap between the two companies," but Amgen's ongoing interest in RA could pan out, she added.

Of the three recent mergers, Ghodsian said, the Millennium/COR deal was the most intriguing, "and not totally surprising. They bought Leukosite [Inc.], a few years ago." That $635 million deal, disclosed in October 1999, gave Millennium an added oncology and inflammation pipeline.

"With COR, you could argue the market was shrinking," she said, adding that Millennium, for its part, "wants to establish a sales infrastructure, so they're ready for their own genomics-based products." But even the Millennium arrangement could be "putting the cart before the horse," Ghodsian said. "If you assume [the sales infrastructure theory] is correct, why are they diluting themselves so much by buying drugs that don't come from their platform? Frankly, to me, it's a bit of a cut-and-paste approach. A drug like COR Therapeutics' [Integrilin] doesn't fit them as much."

Then, too, maybe genomics isn't all it's cracked up to be in the first place, she said, pointing to Human Genome Sciences Inc.'s recent Phase II news regarding repifermin (keratinocyte growth factor-2) for mucositis.

"Maybe [the news coming at near the same time as the Millennium/COR merger] was coincidental, but it puts a disappointing outlook on the genomics front," Ghodsian said.

By far the most synergistic of the mergers was MedImmune's with Aviron, Ghodsian said.

"MedImmune is establishing an infectious-disease focus, and it makes sense for them broaden their pipeline," she said.

What's ahead?

"We've had a few IPOs, but it's not like 2000, when the [financing] window was wide open, which means more mergers, Ghodsian said.

"It may be a sign of a maturing industry, and a process that feeds on itself," she said. "On the pharmaceutical side, it was really in the mid-1990s that we started to see these kinds of 'mega-mergers,'" noting the $30 billion coupling of Swiss firms Ciba-Geigy Ltd. and Sandoz Ltd. in March 1996.

Fortune telling, more so in biotechnology than in other sectors, is tricky, Ghodsian said. But, now that the "mega-merger" trend seems to have come to biotechnology, the smaller companies are likely to join hands, Ghodsian said, thus making themselves attractive to the bigger firms ¿ those that cannot find dance partners will be sidelined.

"The bar," she said, "is getting higher."

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