By Mary Welch
Despite its ongoing legal battles, Transkaryotic Therapies (TKT) Inc. sold $100 million of newly issued convertible preferred stock to E.M. Warburg, Pincus & Co. LLC, with the funds going to expand its Niche Protein platform.
"Warburg, Pincus were the people who founded the company in 1988, and for a number of reasons, they decided it was appropriate to put money into the company," said Daniel Geffken, vice president, finance and chief financial officer at TKT. "We've always been financially opportunistic and took advantage of this to add $100 million to our coffers."
Although New York-based Warburg, Pincus founded the company, its original shares have been distributed. With this stock purchase, the private equity investment firm now will own about 13 percent of TKT, making it the largest institutional investor. Warburg, Pincus purchased about 3.57 million shares at a conversion price of $28 per share, about the market price.
TKT's Niche Protein platform is focused on developing protein replacement products to treat patients suffering from rare genetic disorders. Its lead product, Replagal, finished Phase II trials for the treatment of Fabray disease, which is an inherited metabolic disorder caused by a deficiency or absence of the enzyme alpha-galactosidase A (alpha-gal). The company expects to file a biologics license application "in the near future, sometime this year," Geffken said.
Also planned for the "near future" is the filing of an investigational new drug application for the Niche Protein product enzyme iduronate-2-sulfatase, which will be used to treat Hunter Syndrome (also known as mucopolysaccharidoses type II - MPS II).
Also planned are treatments for five other rare genetic diseases, including Gaucher's disease.
Separately, Cambridge, Mass.-based TKT finished its first week in a trial against Amgen Inc. Amgen, of Thousand Oaks, Calif., claimed that TKT infringed upon its erythropoietin (EPO) patients. The suit was originally filed against TKT and partner Hoechst Marion Roussel AG (now Avenits), of Frankfurt, Germany, in April 1997.
EPO, which is marketed by Amgen under the name Epogen, is a glycoprotein hormone that regulates the level of red blood cells in circulation by stimulating their production in the bone marrow. It was introduced for patients with anemia who are on kidney dialysis. Amgen claims TKT's gene-activated EPO infringes on patents the company has covering EPO
The trial started last Monday in the U.S. District Court of Massachusetts in Boston. Opening statements were completed, and the first witness, Harvey Lodish, explained the technology. Lodish is the author of one of the definitive books on molecular biology, according to Elise Wang, first vice president of PaineWebber Inc. in New York. He is a professor of biology and bioengineering at MIT.
"Both parties made their arguments and they reflected pretty much that each side had said before," said Kevin Tang, senior biotech analyst with Deutsche Banc Alex. Brown in New York. "No new material issues were raised."
"Lodish explained the technology in painful detail," said Jon Alsenas, managing director of ING Barings LLC, of New York. "He explained the whole process of making EPO, and the judge was fascinated."
However, Alsenas added that "Amgen is trying to blind the judge using smoke and mirrors to confuse him. Some of the stuff sounds so trivial but it's not; it's very significant. It's really crucial."
TKT and Aventis tried to have the second witness, Richard Cummings, barred from testifying. Cummings was expected to talk about differences - if any - between the sugar structures of urine-derived EPO and Epogen.
However, Cummings was accepted and, as the week ended, was in the process of having his credentials as an expert presented to the court.
For Tang, the crucial juncture will come when TKT and Aventis "present evidence for invalidation of the patents. They have already had a ruling saying they infringed on one. To win, they must present a pretty strong case for invalidation and they must support it with clear and convincing evidence. That's a high standard."
After the first week of the trial, Alsenas said it was "too early to try to handicap. Amgen is trying to prove a lot of the obvious and TKT will attack the validity of a lot of the findings. There's so much more to come."
Transkaryotic Therapies' stock (NASDAQ:TKTX) closed Friday at $28.625, up $62.5.