By Nancy Volkers
Special To BioWorld Financial Watch
Wyeth-Ayerst Laboratories and Aviron's chart-topping, $400 million collaboration in January for the marketing of FluMist made both sides happy, and is expected to let Aviron grow into a fully integrated company.
The deal is rare, and not only for its size. Most collaborations include components of manufacturing, marketing and distribution (MMD), but agreements such as this one, focused mainly on the end stages of development, are few and far between, analysts said.
Under the terms of the 11-year deal, the Wyeth-Lederle Vaccines unit of Wyeth-Ayerst gains exclusive worldwide rights to FluMist, Aviron's intranasal influenza vaccine. The companies will co-promote FluMist in the U.S., but Wyeth-Ayerst retains marketing rights elsewhere, excepting New Zealand, Korea, Australia and certain South Pacific countries.
"It strengthens our core franchise, expands the use of flu vaccines in new patient populations, and enhances our existing vaccine portfolio," said Doug Petkus, Wyeth-Ayerst's spokesman. The company, a division of American Home Products has a number of "similar" relationships, he said, but FluMist is more fully developed than most of the other products.
Aviron gains the experience and strength of Wyeth-Ayerst, said Carol Olson, Aviron's senior vice president for commercial development.
"This is really a hand-in-glove relationship," she said. "Philosophically, there's a great mesh. One of the things I feared, personally, in getting into a partnership with big pharma is that it would slow us down. That is simply not the case. They want us to run, and [they will] not get in our way."
The last quarter's agreements included a deal between LifeCell Corp. and Boston Scientific Corp. (NYSE: BSX) for worldwide marketing and distribution of urology and gynecology applications of LifeCell's acellular tissue matrix, a deal between Gensia Sicor Pharmaceuticals Inc. and Abbott Laboratories for the marketing and distribution of Gensia Sicor's oncology products, and two deals involving Fresenius AG. The German company signed marketing/distribution agreements with Cypress Bioscience Inc. and Genzyme Corp.
Mary Ann Gray, senior vice president at Raymond James & Associates Inc., in New York, said biotechnology firms are searching for the earlier-stage agreements.
"Because of the way the markets have been lately, most companies do these deals earlier in the process, so they involve some research and development and milestone payments," she said. "Then, they also rely on the pharmaceutical company for marketing and sometimes manufacturing. [MMD deals] have never been really common, because biotechs have never had a lot of money to take a product through."
These collaborations might be seen between pharmaceutical firms and larger biotechnology companies that have the funding to take a product further, but want to maintain the company's focus in a certain area, Gray added. "If they develop a product that's a little bit outside their focus, then they may do an [MMD] deal," she said, especially for help with research and development (R&D) costs.
One-Third Of Partnerships Disbanded
Genentech Inc. has capital aplenty to make it through the R&D phase. The South San Francisco-based company signed a January deal with Schwarz Pharma AG to import, distribute and develop Genentech's Nutropin AQ and Nutropin Depot in Europe and other countries outside of the United States, Canada and Japan. Genentech and Alkermes Inc. will manufacture the products for sale by Schwarz, which is based in Germany.
Large or small, collaborations don't always work out. Far from it, said Peter Ginsberg, senior research analyst at US Bancorp Piper Jaffray, in Minneapolis. He said 33 percent of all collaborations are disbanded.
In February, Genentech ended a collaboration with Alteon Inc. to develop pimagedine as a treatment for overt neuropathy in patients with Type I diabetes. Autoimmune Inc. and Eli Lilly and Co. stopped their 1994 agreement to develop AI-401 for diabetes. Lilly was to have decided after Phase II studies whether it wanted to continue development, but fell behind schedule and did not have enough data to warrant continuation. The deal would have provided up to $20 million in milestones to AutoImmune, giving Lilly manufacturing and marketing rights.
"It's not always the most high-profile pharma that's the best company," Ginsberg pointed out. "It's the company that's committed and has the best complementarity."
Disbanding often happens when the pharmaceutical partner is not committed to the target, when the pharmaceutical company goes through a merger and new management is instated, or when the drug simply doesn't work.
The biotechnology firm may terminate the collaboration if it feels progress is slow, or if there is disagreement about the direction to take with the product or service under development. But, typically, it's the pharmaceutical company that makes the move and, given the market situation, can afford to shop around, Gray noted.
"A lot of the pharmaceutical companies that are interested in technology are like kids in candy stores right now, because of the fund-raising situation in biotech," she said. "[Pharmaceutical companies] can have access to a lot of technology and figure out what they like and don't like."
Short-term deals might be signed to explore the technology in question, and terminated when interest wanes, or when it's discovered that the technology is not in line with the partner's focus.
The quarter's news was not all bad. Some agreements were expanded, as partners found the relationship worth further investment. Lynx Therapeutics Inc., of Hayward Calif., expanded the scopes of several 1996 agreements it signed with BASF AG, of Ludwigshafen, Germany. Nanogen Inc., of San Diego, and Aventis Research and Technologies, of Frankfurt, Germany, expanded their collaboration from two to three years, which assures substantial additional funding to Nanogen in the third year. Aventis is an affiliate of Hoechst Marion Roussel AG of Frankfurt. Millennium Pharmaceuticals Inc., of Cambridge, Mass., signed collaboration extensions with three pharmaceutical partners: Pfizer Inc., Astra AB, and Lilly.
Outcome Of Many Deals Uncertain
Even if collaborations ride it out to the end, few reach the potential dollar amounts hooked to the headlines when deals are signed. But, Ginsberg said, the relative youth of biotechnology means that, in the scheme of things, few deals have actually matured yet, so success is difficult to examine.
What's more, the "bio bucks" phenomenon the tendency to publicize the maximum amount that might be realized from a collaboration leaves even the analysts confused, Gray said.
"Sometimes, it's hard to figure out what proportion is committed funding versus milestones, etc.," she said. In a $10 million deal, for example, only half of that amount, or less, might be an up-front payment, with the rest representing equity or conditional payments after licensing or certain milestones are met.
"My gut feeling would be that it's rare that people meet all those milestones and get all that funding," she said.
But investors, said Peter Drake, vice president of Vector Securities International Inc., of Deerfield, Ill., are sophisticated enough these days to ignore the "bio bucks." Instead, they ask three questions: Who is the pharmaceutical partner in terms of name recognition, marketing and development strength? How big is the up-front licensing fee and committed capital, leaving milestone capital aside? Was equity sold at a premium?
In the Aviron/Wyeth-Ayerst collaboration, more than 75 percent of the $400 million comes from milestone payments, with Aviron expecting to receive about 40 percent of the product revenues from Wyeth-Ayerst. In a December collaboration between Coulter Pharmaceutical Inc. and SmithKline Beecham plc, pegged at $132 million, $76 million, or 58 percent, of the funds represented regulatory and marketing milestones for Bexxar, a monoclonal antibody therapy for non-Hodgkins' lymphoma. *