By Mary Welch
In a deal that an analyst said is potentially worth at least $50 million, SangStat Medical Corp. and Abbott Laboratories will co-promote and distribute SangCya, an oral cyclosporine solution introduced late last year, as well as cyclosporine capsules, pending FDA approval of the latter.
Alex Zisson, senior analyst and managing director of Hambrecht & Quist LLC in New York, expects Abbott to pay about $30 million in milestones, and to fund some research and development for Phase IV studies of cyclosporine.
¿We figure Abbott will also help in the patent litigation [against Novartis Pharmaceutical Corp.], which should go for a few million,¿ Zisson said. ¿And we expect the two will split profits 50-50. It¿s a little difficult to analyze, but it looks like a good deal.¿
SangStat¿s stock (NASDAQ:SANG) jumped 23 percent, closing Monday at $14.562, up $2.75.
¿All we are saying is that Abbott will make a $14 million equity investment in SangStat up front, and milestone payments, and a long-term loan,¿ said Philippe Pouletty, SangStat¿s chairman, who said the companies will collaborate on other products as well.
¿The overall package is very significant, with the equity payment being a small fraction of the overall worth,¿ he said. He declined to say how much equity Abbott, based in Abbott Park, Ill., purchased or at what price. ¿I will say that it was between five to seven percent of the company and it was above the price of our stock last week,¿ Pouletty said.
Zisson estimated Abbott purchased about one million shares at about $14 per share. Without the Abbott purchase, there are 16.3 million shares outstanding.
Cyclosporine is the leading immunosuppressive drug used to prevent graft rejection in solid-organ transplant recipients. Last November, the Menlo Park, Calif.-based company received FDA approval to market SangCya, a generic cyclosporine formulation. It was deemed bioequivalent to the leading cyclosporine product, Neoral, which is developed by Novartis Pharmaceutical Corp., of East Hanover, N.J., an affiliate of Novartis AG, of Basel, Switzerland. SangCya received U.K. approval in April. (See BioWorld Today, Nov. 5, 1998, p. 1.)
Capsules¿ Expected Launch Next Year
SangStat and Abbott expect to launch cyclosporine capsules in early 2000. During the first quarter, the company released positive results from a pivotal bioequivalence trial of SangCya vs. Neoral capsules, and filed for approval of the capsule formulation in the U.K.
Cyclosporine products account for more than $1.35 billion in global sales, of which more than $500 million is generated in the U.S. Between 140,000 transplant patients in the U.S., and 250,000 worldwide require daily immunosuppressive therapy from the time of the transplant until the end of their lives.
William Tanner, an analyst with Vector Securities International Inc., in Deerfield, Ill., said the deal is ¿a little surprising and inconsistent in that SangStat looked like [it] wanted to market SangCya on [its] own.¿ The agreement ¿might indicate that early market data on the liquid form showed that market penetration was pretty minimal,¿ he said. ¿It calls into question the significance of a liquid generic cyclosporine.¿
Sergio Traversa, an analyst with Mehta Partners LLP, in New York, said in ¿reading the stock price, it looks like a positive deal, an intelligent move. Abbott brings a lot of marketing power and muscle to SangStat, which helps them go up against Novartis. And, SangStat doesn¿t give up much. They still have global rights.¿
Pouletty said SangStat has a sales force of more than 20, and will join ranks with Abbott¿s large sales machine and pharmaceutical presence. ¿I believe it will give us the strongest sales force in the transplant area in the U.S.,¿ he said. ¿All those rumors that were being spread that SangStat could not face the competition will now go away with this co-promoting agreement. We will be able to face the competition.¿
Novartis Playing Hardball¿ In Dispute
Tanner said Novartis is playing ¿hardball. If it were an expanding market, Novartis may be more cavalier or casual, but it¿s not. They are defending their turf.¿
SangStat, which just reported a first quarter 1999 loss of $9.7 million (or 60 cents per share), will need all the ammunition it can get to battle Novartis. The company already has priced SangCya about 20 percent lower than Neoral, or about $4,800 per patient, instead of $6,000.
In February, Novartis fought the intrusion of its turf, filing two lawsuits. The first, in U.S. District Court for the District of Columbia, alleged that the FDA did not follow its own regulations in approving SangCya. Novartis contended that SangCya and Neoral are different dosage forms, and should not be automatically substituted for each other. The FDA has filed a response.
The second lawsuit contended SangStat infringed on Novartis¿ patent covering cyclosporine. That lawsuit was filed in the U.S. District Court for the District of Delaware. SangStat has filed an anti-trust counterclaim, Pouletty said.
¿I think Novartis¿ lawsuit is more of a delaying tactic, an obstructive maneuver,¿ Zisson said. ¿There¿s not a great likelihood of success.¿ n