DUBLIN, Ireland - Paramount Capital Investments LLC has secured what Senior Managing Director and Head of Venture Capital Steve Kanzer described as a “beachhead“ in Hungary through its acquisition of the Institute for Drug Research, in Budapest.
Terms of the transaction were not disclosed. New York-based Paramount led a group of investors, including Nomura Bank Switzerland Ltd., Wexford Management LLC and Magnum Global Investments Ltd., in the acquisition of an 87.5 percent stake in the institute from five Hungarian pharmaceutical firms.
A sixth shareholder, Gideon Richter Ltd., of Budapest, Hungary's largest pharmaceutical company, has retained a minority interest in the institute, which has been involved in drug development since 1950.
Kanzer will move to Budapest in two weeks to become CEO and chairman of the institute. Although his appointment is on an interim basis, Kanzer will remain there for the foreseeable future.
“I see tremendous opportunity with the institute,“ he told BioWorld International. Paramount also is establishing an office in the Hungarian capital to pursue other investment opportunities. Kanzer sees a strong potential for spinning off Hungarian academic work into commercial ventures. “They just need the model,“ he said.
The Institute for Drug Research will be converted into a standard biotechnology company, Kanzer added. It has a pipeline of drug candidates, both small chemical entities and biologics, primarily for cardiovascular disease and diseases of the central nervous system. Its most advanced compound, called GYKI-16,084, is a combined alpha-1 and alpha-2 adrenoreceptor antagonist with application in benign prostatic hypertrophism.
This compound, which is potentially a US$5 billion drug, according to Kanzer, is about to enter Phase I clinical trials.
The institute also will continue to offer contract research services to third parties. Its client base includes American Home Products Corp., of Madison, N.J.; Solvay Group, of Brussels, Belgium; Schering AG, of Berlin; and Takeda Chemical Industries Ltd., of Osaka, Japan.
It has particularly strong ties to Germany, Kanzer said. These will be maintained, but he also plans to market the center in other European countries and in the U.S.
The institute offers an attractive risk-reward profile for toxicological testing and preclinical development because of its relatively low labor costs, Kanzer said. It also has expertise in fermentation technology.
He aims to grow the staff from 250 to 1,000. The institute will be groomed for an eventual initial public offering, which could take the form of a combined listing on Nasdaq and either Easdaq or the Budapest Stock Exchange.
Hungary A Gateway To Eastern Europe
The Budapest exchange, Kanzer said, is “really becoming the center of the exchanges for all of central and Eastern Europe.“ The country as a whole is a “boom town,“ he observed, since it is on the receiving end of 40 percent of all external investment going into Eastern Europe, including Russia.
This deal is part of what Kanzer described as the “next wave“ of investment in R&D in Eastern Europe, following earlier privatizations of companies involved in infrastructure provision, such as telecommunications.
The institute was the central drug research and development facility not only for Hungary, but for the entire Soviet bloc from 1950. Under the old Soviet system of central planning, Hungary became the principal center for the pharmaceutical industry.
Ownership of the institute transferred to six state-owned pharmaceutical companies during the 1980s, but this structure became untenable following takeovers by competing foreign companies of four of these shareholders.
“These groups wanted to step out of the way so the institute, which they built up and which is a national treasure, would not go bankrupt but instead would prosper,“ Kanzer said. *