By Randall Osborne

Editor

The world of biotechnology once was so simple. That is, the business was, even when the research wasn't.

Industry firms, clearly distinguishable from companies in the pharmaceutical realm, made deals with the latter, which resulted either in happy faces (and bulging pockets) on both sides at FDA approval time and beyond, or ended with tragic product blowups in the clinic.

Or, sometimes, the deal's finish was just a fizzle. It landed between the two extremes, with the pharmaceutical company, for example, giving back the rights to a drug and claiming "too many other commitments" and the biotechnology firm reasserting the worth of the partnerless product. Such episodes often left investors, especially less sophisticated ones, wondering what really took place in the boardroom, or behind the laboratory door.

To a large degree, things still work that way. But lately, determining to which team a player belongs has become significantly more difficult. What once was hard and fast business, paired with somewhat less hard and fast science, has become less clear.

As analysts have been fond of saying for some time now, the industry is growing up. Maturing. The men are being separated from the boys. The wheat is winnowed from chaff.

What this means specifically, among other things, is that biotechnology companies are no longer as categorically identifiable as before. Firms that once relied, like ladies in waiting, on word from pharmaceutical enterprises, are increasingly moving out to make their own deals often with other biotechnology companies.

A recent, and potentially big-money, instance is last week's licensing deal between Amgen Inc. and Immunomedics Inc., worth up to $308 million for the latter. The agreement is focused on LymphoCide (epratuzumab), Immunomedics' humanized antibody for non-Hodgkins lymphoma (NHL).

Amgen is paying $18 million up front, plus as much as $65 million in milestone payments and royalties.

"There's the tiered plan associated with this, but we find it substantial," Cynthia Sullivan, president and chief operating officer of Immunomedics, told BioWorld Financial Watch. "And the third part is these one-time sales bonuses."

That's where the most gold lies. Amgen has promised between $50 million and $225 million more if sales reach between $500 million and $1 billion amounts Sullivan called "realistic, or at least achievable," given the sales projected for the already-marketed NHL product, Rituxan [rituximab], which belongs to a duo of other biotechnology firms: Idec Pharmaceuticals Corp. and Genentech Inc.

Amgen's deal with Immunomedics follows the biotechnology powerhouse's entrée into licensing an in-the-clinic drug in March 1999, when Amgen signed an agreement with Praecis Pharmaceuticals Inc. for abarelix, then in Phase III trials for treating hormonally responsive prostate cancer.

Abarelix, a gonadotropin-releasing hormone (GnRH) antagonist (also referred to as an inhibitor of luteinizing hormone releasing hormone) is designed to reduce testosterone levels quickly.

Earlier this month, riding high on favorable Phase III data, Praecis submitted a new drug application (NDA) to the FDA having taken abarelix, with Amgen's help, from Phase I/II studies to NDA stage in only three years.

Other such deals lately include another involving Genentech, this one worth as much as $140 million with the Swiss company Actelion Ltd., regarding its endothelin receptor antagonist, Tracleer. Upon FDA approval of the drug, which is used to treat pulmonary hypertension, the firms will co-promote and further develop it. In February, Genentech signed a similar agreement for tezosentan, Actelion's heart-failure drug, worth a potential $75 million.

Tracleer proved encouraging in a pivotal Phase III trial, and Actelion submitted an NDA last month, with more data coming later from a larger Phase III study.

Such deals make Genentech a premium stock, said Eric Schmidt, an analyst with SG Cowen Securities Corp.

"Investors like pipelines, no question about it, and Genentech is widely regarded as having a good pipeline, largely from an aggressive in-licensing program," he said. "More than a third of their product line has been in-licensed, and the market is paying them for having done that."

Other, smaller biotechnology firms are getting into the act. Myriad Genetics Inc. this month acquired from Encore Pharmaceuticals Inc. the rights to develop, manufacture and market E-7869, tested in Phase IIa trials for prostate cancer. Terms were not disclosed. Myriad plans to submit data from the trials to the FDA by the end of the first quarter 2001, with a pivotal study expected by the end of next year.

"Just by virtue of there being a larger number of companies that have sales forces, you can expect they can run through some of the products [developed by other firms for licensing], and be like big pharmas," Schmidt said. "Opportunistically, there are economies of scale to marketing. If you've already got an oncology franchise or inflammatory franchise with a sales force, most likely you've only been able to place one or two of your own products."

Quick to spot trends, some are comparing the Amgen deals with Genzyme General's licensing arrangement in September with Cambridge Antibody Technology plc (CAT). The broad partnership aims to develop and commercialize monoclonal antibodies, two from CAT and one from Genzyme. Taking in all indications other than ophthalmic uses, the deal includes small-molecule antagonists, which CAT is licensing to Genzyme for milestones and royalties.

Becoming another licensee of CAT this month was Immunex Corp., which is paying a fee plus milestones and royalties for CAT's antibody library for reagent generation and target validation, and eight options to develop monoclonal antibodies.

But these are hardly the same. "We've been seeing a lot of those type deals, which have been going on for some time," Schmidt noted. The Amgen-style biotech-to-biotech licensing represents a clear change from four or five years ago, he said, and may best epitomize the trend which was practically inevitable as a "surrogate marker for the fact that the industry is growing up a little bit."

This doesn't simplify things for investors. In fact, it demands more study, and the matter is not as straightforward as shopping for companies that happen to be better able than others at snatching up drugs from other biotechnology firms, Schmidt said.

"Just because you're big and you in-license more doesn't mean you're doing the right deals," he said. "Amgen's a big company, so the LymphoCide deal may not mean a whole lot to the bottom line. It may be lost in the shuffle."

Not that Amgen's bottom line is at all unfavorable and, like Genentech's, the bottom line may only get better through such practices.

"There's nothing magical about it," Schmidt said. "The Amgens of the world attend the same conferences and trade shows that the Immunomedics of the world attend. People are looking for products. It's very competitive out there." *