By Matthew Willett
Avigen Inc. and Bayer AG agreed to a marketing plan for Avigen's Coagulin-B gene therapy treatment for hemophilia B that gives the German giant worldwide license to market and commercialize the late-phase therapeutic.
Avigen, of Alameda, Calif., will get a $15 million up-front equity investment from Bayer, of Leverkusen, Germany, in addition to development costs associated with a planned Phase II/III trial, manufacturing costs, milestone payments and royalties contingent on commercialization.
Avigen's Coagulin-B delivers the gene for factor IX, the missing or deficient protein that causes hemophilia B, to the muscle cells where factor IX is produced using the company's proprietary adeno-associated virus vector system, which makes use of an adenovirus stripped of its genetic material.
The deal is valued at up to $60 million, largely for the downstream revenue potential. Avigen officials said that potential was one of the motivations for the deal.
"Downstream is a big part of this," Avigen CEO John Monahan said. "We'll manufacture and deliver to Bayer for their distribution. Our name will be on the label as well as Bayer's, and we'll receive a substantial amount of the profit."
Senior Biotech Analyst Matthew Geller at CIBC World Markets is bullish on the collaboration. He said the move is a strong one for Avigen, establishing it as the clinical leader in gene therapy.
"I think it's very exciting for several reasons," Geller told BioWorld Today. "There's nice revenue up front, and it's a validation of the Avigen gene therapy program. I think gene therapy is going to be one of the key approaches for targeting for genomic products, and this establishes Avigen as the leader in the clinic for gene therapy programs. It's just one of their programs that's producing substantial revenue."
All parties agreed the deal represents a validation of Avigen's AAV technology, both as a delivery method and as a potent revenue producer.
"Avigen was a late-comer to the party in terms of gene therapy and ways of getting gene therapeutics into the cells," Monahan said. "Avigen started late, but what made the difference is that our method had unique properties of getting large amounts of proteins to cells for an extended time, and it has bubbled to the surface as the leading technology."
Geller agreed the real cherry on top for Avigen is the deal's back end - royalties on commercialized products.
"The most exciting thing is the back end," he said. "Avigen is getting the lion's share of the profits. It's an extremely positive deal and the fact that they negotiated for a big percentage of the profit indicates Avigen's enthusiasm for the market potential for this product."
Anthony Nagle is Bayer's vice president of life cycle management and the maestro behind the deal from the Bayer side. He said the market and revenue potential for Coagulin-B is directly related to the big-dollar size of the Avigen deal.
"The prevalence, the number of people living with this condition, is 8,000 or 9,000 individuals with hemophilia B," Nagle said. "The incidence, the number of new cases coming into the population pool, is about 150 patients per year in the 17 most developed markets in the world."
He added that recombinant human factor IX, the current gold-standard therapy for hemophilia B, averages $120,000 to $150,000 annually. "The current marketplace is about $350 million annually," he said.
Reaching that market, however, won't be quick and easy. Gene therapy, Nagle said, is still a new field and one that will demand stringent premarket testing. He characterized Bayer's development plans for Coagulin-B as "prudent," adding that Bayer anticipates filing a biologics license application in late 2005.
"This marketplace, and the newness of this way of treating any condition, is going to make it take a lot longer to develop than a pill," he said.
That wait is worth the work, however, Nagle added.
"Gene therapy is a rapidly expanding and evolving area, not just in hemophilia, but in a range of diseases," he said. "We believe hemophilia will be one of the first conditions to be treated by gene therapy, and as a part of our commitment to that therapeutic area we're making this bold and first move."
Avigen's stock (NASDAQ:AVGN) closed Friday at $40.75, down $2.687.