By Brady Huggett
Millennium Pharmaceuticals Inc. and ILEX Oncology Inc. agreed to dissolve their 50-50 joint venture ¿ Millennium & ILEX Partners LP ¿ giving ILEX Millennium¿s 33 percent of Campath for roughly $140 million and allowing Millennium to instead focus on products it said should generate the highest return.
The end of 2001 will bring about the end of the joint venture. Millennium will receive $20 million in cash at that point and will be eligible for a $40 million yearly payment over the next three years, providing U.S. sales of Campath reach $15 million annually each year. If not, the payment is deferred to the year when the product does generate $15 million in revenue and then added to the balance due. Also, Millennium will receive an undisclosed royalty beginning in 2005 if Campath sales reach a certain level.
Outside the walls of Millennium in Cambridge, Mass., backing out of a venture that had recently achieved its goal of product approval might raise an eyebrow or two, but the impetus behind it is simple, said Clare Midgley, Millennium¿s vice president, corporate communications.
¿Primarily, Millennium, as we have been growing our company, is looking to make sure it is putting its resources and investments where we have the largest ownership,¿ she said. ¿This allows us to devote more time, attention and resources to the products where we have the greatest percent of ownership.¿
Dennis Harp, analyst for Deutsche Banc Alex. Brown Inc., said in a research note that his firm views the restructuring as ¿highly positive for Millennium¿ and said it should be ¿financially accretive for Millennium from 2001 to 2004 and earnings neutral thereafter.¿ Harp adjusted his loss per share for the company following the release of the news, lowering it from 57 cents to 48 cents for 2001, from 68 cents to 51 cents in 2002, from 82 cents to 73 cents in 2003 and from 37 cents to 29 cents in 2004.
Richard Love, CEO of San Antonio-based ILEX, said the deal fits his company as well.
¿It makes sense to ILEX on several fronts,¿ he said. ¿First, on an economic basis, on the expected rate of return that we believe we will get. Second, it makes sense to patients, because we are able to streamline the decision-making process. Third, it makes sense from a strategic point of view, because we will be able to co-promote this so it will get us into the commercial side of the business.¿
Campath was launched in the United States in May and in the European Union in August to treat patients with chronic lymphocytic leukemia. Schering AG, of Berlin, handles worldwide sales and marketing, excluding Japan and East Asia. In the States, Schering¿s affiliate, Berlex Laboratories Inc., markets the product. Love said the foray into marketing will be beneficial for years to come. (See BioWorld Today, May 9, 2001.)
¿We have the option under the agreement with Berlex to co-promote the product by fielding a medical science liaison team,¿ Love said. ¿We¿ll form that now. We have some in place, but we¿ll be building on that going forward.¿
ILEX has five compounds in development, the furthest alone being Eflornithine, in Phase III trials for superficial bladder cancer and familial adenomatous polyposis. It holds worldwide marketing rights for that product.
In relation to the restructuring, ILEX also filed for a public offering, looking to generate the funds it will need to pay Millennium. It registered to sell $5 million shares and granted the underwriters ¿ CIBC World Markets Corp., of New York; UBS Warburg LLC, of Stamford, Conn.; and U.S. Bancorp Piper Jaffray Inc., of Minneapolis ¿ an option to purchase an additional 750,000 shares. Based on ILEX¿s Monday close of $27.50, the offering would raise $137.5 million, excluding overallotments.
ILEX¿s third-quarter earnings are due out today. It had $177 million in cash and cash equivalents as of June 30, and about 26.5 million shares outstanding.
ILEX said it also would use the proceeds to expand its clinical trials and preclinical research, fund research and development, potentially acquire complementary products or technologies and for general corporate purposes and working capital.
Campath, the product in the middle of all this, generated $11.2 million in global net sales in the third quarter, and has brought in $16.5 million to date. The human monoclonal antibody binds to the antigen CD52+ and induces antibody-dependent lysis, resulting in removal of the malignant lymphocytes from the blood, bone marrow and other affected organs. Love, bound by SEC-imposed quiet-period rules, couldn¿t speculate on how much the product may grow, but did say the company is seeking to apply the product in other areas, including multiple sclerosis.
Now able to receive more attention and resources at Millennium are LDP341, a proteasome inhibitor in Phase I (solid tumors in combination with chemotherapeutic agents) and II trials (multiple myeloma and chronic lymphocytic leukemia); J591, a product in-licensed from BVL Biologics and being developed for prostate cancer; and LDP977, a small-molecule compound in a Phase I trial for asthma. But the restructuring will benefit more than the pipeline, Midgley said.
¿The other place is our platform,¿ she said. ¿Our platform that helps us sustain new products coming into the clinic every year.
¿We have been excited to have participated in bringing Campath to the market and demonstrating that we can bring a novel product to the marketplace,¿ she added.
ILEX¿s stock (NASDAQ:ILXO) fell $2.45 Tuesday, or nearly 9 percent, to close at $25.05. Millennium¿s stock (NASDAQ:MLNM) closed at $24.33, down $1.98.