By Matthew Willett
Genzyme Transgenics Corp. made two moves this week to streamline its operations toward its focus of monoclonal antibody production and immunoglobulin fusion proteins.
On Wednesday, Charles River Laboratories International Inc., of Wilmington, Mass., reached a definitive agreement with GTC for the $52 million acquisition of Primedica Corp., of Worcester, Mass., Genyzme's preclinical and discovery and development services subsidiary.
The purchase calls for a $26 million cash payment to GTC, $16.5 million in restricted Charles River Laboratories stock and the assumption by Charles River of $9.5 million of Primedica debt.
And on Tuesday, GTC - spun off in 1993 from what is now Genyzme General - said it is abandoning its efforts to reacquire rights to recombinant human antithrombin III (rhATIII).
Those rights are held by a joint venture between GTC and Genzyme General, called ATIII LLC, which doesn't plan to pursue the drug's development for treatment of heparin resistance in patients about to undergo cardiopulmonary bypass surgery.
GTC's stock (NASDAQ:GZTC) dropped 12.5 percent Wednesday, or $1.438, to close at $10.063.
Tom Newberry, Genzyme Transgenics' director of investor relations, said the moves reflect the Framingham, Mass., company's direction for future growth.
"I think it's more of an affirmation of a move we started a few years ago, an affirmation that we continue to see monoclonal antibody production as an area of high growth now," Newberry told BioWorld Today.
GTC produces proteins in the milk of transgenic animals. Its focus is on producing monoclonal antibodies for therapeutic use in chronic diseases such as rheumatoid arthritis, other autoimmune conditions and cancer.
Genzyme Transgenics is currently developing transgenic versions of monoclonal antibodies and fusion proteins for biotechnology and pharmaceutical companies including Abgenix Inc., of Fremont, Calif.; Bristol-Myers Squibb Co., of New York; Centocor Inc., of Malvern, Pa.; Elan Pharmaceuticals Inc., of San Francisco; and Progenics Pharmaceuticals Inc., of Tarrytown, N.Y.
Its pipeline of drug candidates in development includes Centocor's Remicade, an FDA-approved treatment used in combination with methotrexate for the reduction of signs and symptoms of rheumatoid arthritis in patients who have had an inadequate response to methotrexate. Remicade is under development in preclinical study as a transgenically produced monoclonal antibody for treatment of Crohn's disease and rheumatoid arthritis.
The GTC pipeline also includes D2E7 and CTLA4Ig, a fully human monoclonal antibody and an immunoglobulin fusion protein, respectively, both for rheumatoid arthritis.
SG Cowen analyst Eric Schmidt, who covers Charles River Laboratories, said the Primedica sale offered GTC an opportunity to capitalize a resource that wasn't a focus.
"For Genzyme Transgenics this is obviously not a core asset," Schmidt said. "This is not what investors are paying the company to do right now. It increases the focus on their own distinct set of commercial operations, and allows them to monetize an asset, adding to their balance sheets."
Newberry echoed that rationale. "Things converged to make it a good time to consider that transaction. We thought Charles River offered an opportunity to the Primedica employees, we felt their offer was fairly valued, and we felt that we could use that value to ensure and reinforce what we believe is our future growth area: transgenic production."
The abandonment of rhATIII isn't such a positive story, but one with a silver lining, Newberry said. After talks with the FDA made it clear that additional information would be required to support an approval in the indication, the company had to re-evaluate its priorities for what was then the lead program.
"The recombinant antithrombin III program for a long time now has been the lead program for Genzyme Transgenics, so when we announced that we could no longer continue development, it really wasn't a positive piece of news," Newberry said. "But in the grand scheme of things, because we've developed a broad pipeline with significant and sophisticated partners, that lead program, in our view, is just one program among many.
"It got to a point when we had a recent meeting with the FDA and discussed the status of the clinical program, and it became clear that they would end up requiring much more data than we had already," he added. "We looked at what it would take to acquire that data, and the expense and time just didn't make sense from a business perspective."
Newberry said the move isn't one that should reflect on GTC's larger prospects.
"The positive aspect is that we're large enough and financially strong enough and we have broad enough relationships in the industry that we can look at any program, even the lead program, and make decisions about whether the resources make sense and put them where they do make sense," he said. n