By Brady Huggett
Even before the ripples from the MedImmune Inc. and Aviron Inc. $1.5 billion merger had a chance to subside, Millennium Pharmaceuticals Inc. dropped this gem into the biotechnology pool: It is merging with COR Therapeutics Inc. in a stock exchange worth $2 billion.
The merger brings COR¿s marketed product, Integrilin, into Millennium¿s fold and gives Cambridge, Mass.-based Millennium an experienced sales force ¿ two things that prompted Millennium¿s CEO Mark Levin, in a conference call, to call his suddenly bigger company ¿the next major biopharmaceutical player.¿
The merger agreement states COR shareholders will receive 0.9873 shares of Millennium stock for each COR share. Based on Millennium¿s closing stock price on Wednesday of $35.45, the merger values each COR share at $35 ¿ a 77 percent premium to COR¿s Wednesday close of $19.74 and a 64 percent premium to its trailing 30-day average. Millennium expects to issue a total of about 58 million new shares, giving COR shareholders about 20 percent of Millennium.
Millennium¿s stock (NASDAQ:MLNM) fell $5.89 Thursday, or about 16.6 percent, to close at $29.56. COR¿s stock (NASDAQ:CORR) jumped $8.46, or 42.9 percent, ending the day at $28.20.
Added to MedImmune and Aviron¿s merger, and Cephalon Inc.¿s purchase of the French company Group Lafon for $450 million, the week has seen mergers worth nearly $4 billion.
Bill Tanner, analyst for SG Cowen Securities Corp. in New York, said that while the move does give unprofitable Millennium a product, the merger seemed like it was born out of ¿a need to do something,¿ instead of a genuine smooth, tight fit. A fit he saw more clearly in the MedImmune-Aviron merger. (See BioWorld Today, Dec. 4, 2001.)
¿It remains to be determined [if this is a good move],¿ he said. ¿[Millennium] has had an interest in the cardiovascular area, but this isn¿t one of its three main franchises.¿ He added that he didn¿t ¿have the same level of comfort¿ in Millennium melding with COR¿s strengths as he does in MedImmune meshing with Aviron¿s.
Still, Tanner said Millennium¿s stock is a core long-term holding in any biotech portfolio and the deal is positive in the long term.
The mood at Millennium, however, was more celebratory and Marsha Fanucci, vice president, mergers and acquisitions, said the company got exactly what it sought.
¿We have had a deliberate process over the last year, looking for where to go next,¿ she said. ¿We have always had the cardiovascular area as a strong research area at Millennium. We went through a stringent set of criteria, looking at the culture of the company, at the passion, looking at the commercialization skills at the company and how complementary our research and development activities were. And [COR] was an excellent fit with what we set out to achieve.¿
The merger is subject to approval by both companies¿ shareholders as well as regulatory clearance. The deal is expected to close in 2002¿s first quarter.
Millennium, in late October, sold its 33 percent share of Campath to ILEX Oncology Inc., of San Antonio, for up to $140 million, dissolving their joint venture, Millennium & ILEX Partners LP, a transaction Tanner said he favored. Campath is approved in the United States and European Union to treat patients with chronic lymphocytic leukemia.
So while it lost the revenue from Campath, Millennium will get COR¿s portion of the U.S. 50-50 profit-sharing agreement for Integrilin between COR and Schering-Plough Corp., of Madison, N.J. Outside the States, COR, and now Millennium, will receive double-digit royalties on sales. The deal began in 1995 and was valued at up to $120 million for COR. (See BioWorld Today, Oct. 31, 2001, and April 12, 1995.)
Tanner said that Millennium bettered itself when comparing those two products, saying that if Millennium stands to get 50 percent on U.S. Integrilin sales, it is a step up from the 33 percent of Campath sales it was to receive, both in percentage and overall sales revenue.
Integrilin is indicated for the treatment of patients with acute coronary syndrome including patients who are to be managed medically and those undergoing percutaneous coronary intervention. It also is indicated for use at the time of percutaneous coronary interventions, including procedures involving intracoronary stenting. COR¿s third-quarter¿s figures for the product were $53 million in the United States and $59 million overall, but due to flagging sales, Millennium and COR dropped their year-end estimates for the drug from the $240 million to $250 million range to $225 million to $230 million. There are questions in the industry about the drug¿s growth rate and the strength of the competition.
¿You have to have concerns about the drug,¿ Tanner said. ¿It¿s not going in the best direction. Sales have faltered a bit; drug-coated stents may have an impact on it.¿
Integrilin also is in more than 20 trials to determine its efficacy in various indications. Beyond Integrilin, Millennium receives COR¿s sales force of more than 100 people that backed it, a big plus, Fanucci said.
¿That¿s an incredible asset for us to build around,¿ she said. ¿This sales force has taken a product from launch to a more than 50 percent market share against industry leaders. They have proven they can deliver in a highly competitive arena against the best marketers in the industry.¿ The sales force, besides continuing its responsibilities for Integrilin, will be used to help launch LDP-341, Millennium¿s anticancer proteasome inhibitor in Phase I and II trials.
That sales force also will shoulder the task of increasing Integrilin¿s sales by 30 percent over the next several years, an expectation made public with the announcement of the merger. A tall order, but Fanucci said it will be accomplished by both expanding the market and increasing Integrilin¿s share of it.
Regardless of future Integrilin sales or how well these two companies fit into each other¿s arms when pressed together, details of the combined company speak of impressive size. Once together, Millennium, as it will still be called, will employ 1,800 people, including more than 1,200 research and development scientists. It will have more than $2 billion in cash and cash equivalents and have an estimated $400 million in combined revenue. The main focuses for the company will now include cardiology along with Millennium¿s traditional programs in oncology, inflammation and metabolic disease. The larger, wider pipeline will have nine products in the human trials and will be expected to introduce three or four new products to the clinic in 2002.
In addition to Integrilin, COR is developing Cromafiban, an oral GP IIb/IIIa inhibitor that is in Phase II trials for acute coronary syndrome and stroke.
Besides the pipeline, there will be some mixing at the top. Vaughn Kailian, CEO of COR, will join Millennium as vice chairman and will become responsible for commercial operations and therapeutics. Charles Homey, COR¿s executive vice president of research and development, will become president of research and development at Millennium. Also, Kevin Starr, Millennium¿s executive vice president, business operations, and chief financial officer, was promoted to chief operating officer.
Tanner pointed to companies with products on the market as examples of recent success stories, and mentioned that typically Millennium has been thought of as a genomics and technology platform company. He said the merger helps hammer Millennium into what it may be trying to become ¿ a product company. Here, Fanucci agreed.
¿Mark Levin has always described the genomics revolution as a discontinuity in the pharmaceutical industry,¿ she said. ¿This merger is a major milestone for making a different kind of company. We are building a company with the best of both worlds. We always felt that partnerships were a critical part of creating this type of model. Now we are moving into the real product orientation.¿