By Randall Osborne
From the start, almost like the Fuller brush salesmen or encyclopedia peddlers, biotechnology company officials have been arriving on the doorsteps of pharmaceutical firms, pleading for the chance to show their wares.
Things have grown a bit more sophisticated lately. There are still the fumbling, sweaty presentations at conferences by biotechnology CEOs ("Can we back up? I think we skipped a slide"), but fewer speakers these days tend to stammer during their turns at the lectern, under the hot lights.
The reason is simple: Brave new science means more attractive potential for drug development, which has given everyone in the industry vastly more confidence.
But, in many ways, the scenario remains the same. Biotechnology looks to major pharmaceutical companies to provide the funding through deals in order for research to continue and in order in the happiest of worlds to make marketing of an approved product happen down the road.
Even today, such agreements can mean the difference between life and death, especially for smaller research outfits.
Nobody was quite ready to say the picture has changed completely with last week's $250 million deal between Millennium Pharmaceuticals Inc. and Abbott Laboratories. Nobody wanted to declare that the collaboration heralds any kind of trend. At the same time, it was clear to all that, for once, if only in a small way, the table seemed to have turned.
Abbott, having failed in its late-1999 bid to take over Alza Corp., found itself with what analysts noted is a narrowing pipeline, with its clot-buster Abbokinase stalled off the market by the FDA because of manufacturing questions.
Millennium was just what Abbott, of Abbott Park, Ill., needed. Although no significant revenue impact for Abbott can be expected anytime soon, the deal gives Abbott strength in the area of metabolic disease, specifically obesity and diabetes.
Under the terms of the five-year agreement, Abbott will buy $50 million in Cambridge, Mass.-based Millennium stock when the deal closes, and $200 million more over the next two years, in eight quarterly installments, which amounts to about 3 percent ownership at current prices.
The firms will share equally in all phases of development, splitting costs related to candidates already in their pipelines. They plan to put two drugs into the clinic by 2002, advancing two or three more drugs to that stage every year after. Four or five marketed products are expected in seven to 10 years, with the first hitting the market in about 2007.
Millennium and Abbott also will divide efforts toward commercialization in the U.S., with Abbott responsible for it in the rest of the world, although Millennium retains the right to co-promote in major European markets. Worldwide profits will be shared.
"I wouldn't say it's a rescue [of Abbott by Millennium], but it's a wake-up call for Abbott that says biology is important," said Douglas Lind, an analyst with Morgan Stanley Dean Witter, in New York.
"Who would have thought, three years ago, we'd be seeing 50-50 deals like this?" Lind told BioWorld Financial Watch.
Together, Millennium and Abbott have more than 35 projects in obesity and diabetes, and more than 225 scientists available to work on them.
Focused mainly on small molecules, the deal could branch into proteins, antibodies and antisense drugs for metabolic diseases, and both firms will pursue in-licensing of new therapeutics.
The collaboration also includes a provision for developing pharmacogenomic and traditional diagnostic assays directly related to gene targets and drugs developed. Abbott would sell the diagnostic tests to researchers and laboratories, and Millennium would join in promoting them to physicians and patients.
Anna Protopapas, Millennium's senior director of business development, said the diagnostics won't be separated from other efforts.
"I don't think we've disclosed [the details of] it, but what we're really looking at is an integrated approach," she told BioWorld Financial Watch. Diagnostics will go "hand in hand with therapeutics," she said, to lay groundwork for the much ballyhooed "personalized medicine."
Protopapas was a key player in putting together the Abbott deal, which took about a year to finalize, although "we really started negotiations about three months ago," she said.
There will be some nonexclusive trading of technology with Abbott, too. Abbott will make available its Structure Activity Relationship by Nuclear Magnetic Resonance, along with robotics crystallography, to Millennium, which in return will offer access to some of its bioinformatics software.
Last June, Millennium entered a potential $450 million deal for anti-inflammatory drugs with Aventis Pharma, the pharmaceutical company of Frankfurt, Germany-based Aventis SA, which bought an equity stake of $250 million. Lind said, "it's a different deal, no question, but it's in the same category." In less than a year, he noted, three deals have taken place that rope off an entire therapeutic-diagnostic area for both parties.
The third deal to which he refers was struck in January between CuraGen Corp. and Bayer AG, of Leverkusen, Germany. Also for obesity and diabetes, the discovery alliance calls for joint research funding for up to 15 years and $1.34 billion. The plan is to put into the clinic two small-molecule drug candidates selected from 80 targets provided by CuraGen, of New Haven, Conn., over the next five years.
Research costs will be split 56-44 between the two firms, and profits from product sales will be split according to each company's contributions.
"CuraGen didn't quite get 50 percent, but it was close," Lind said. "This really represents a shift in value from what used to be chemistry and marketing in the pharmaceutical industry. The playing field is going to be in biology, in targets. Anybody can build a compound, and Millennium is clearly the No. 1 company able to do that. Human Genome Sciences [Inc.] will be doing it more and more on the protein drug side."
Both of Millennium's recent arrangements have involved equity sales, which Lind said is "no big deal. They want their partners to be fully aligned with Millennium's best interests. You could say, 'Gee, why is Millennium selling more stock with $1.5 billion in the bank?' The answer is, you don't know when you'll have to raise money again."
In a research note, Lind said the Abbott deal had "the fingerprints of [Abbott's chief scientific officer] Jeffrey Leiden all over it." Leiden "is a protein guy, and he's focusing more on the biology" exactly what the industry requires, Lind said.
The technological capability and the size of Millennium and CuraGen make possible their bargaining power, he said. "There are a few other companies out there that can do it," Lind said. "Myriad [Genetics Inc., of Salt Lake City] might be able to do it, as well."
Lind predicted Millennium "probably won't do any more [deals] like this," because its areas of study are cancer, metabolic disease and inflammation. "They've already done their deals," he said. "They'll do more partnerships on a one-off basis."
Alan Crane, senior vice president of corporate development for Millennium, wasn't saying no and he wasn't saying yes to a similar deal in oncology.
"It depends," he told BioWorld Financial Watch. "We are in some interesting discussions now, in a variety of disease areas. No promises on when those will get done, but we're pushing the envelope."
He added that "it's not just size" that has made Millennium appealing to other firms. "We have a uniquely strong position in having integrated technologies and applied them," he said. "A number of our partners have told us they went through a process of looking at every company in the world."
Lind said the trio of deals including Millennium's pair do not, by themselves, represent a trend, since not all companies can pull them off but that shouldn't minimize the interest in the Millennium-Abbott collaboration as an example of the overall industry shift toward biology.
"It increases the importance," Lind said.