Monsanto To Pay $218M In Pact With Millennium
By Randall Osborne
In a five-year deal worth up to $218 million, Millennium Pharmaceuticals Inc. will use its genomics technology platform to develop agricultural products with Monsanto Co. — and plans to benefit from the establishment by St. Louis-based Monsanto of a subsidiary in Cambridge, Mass., where Millennium is headquartered.
Monsanto also broadened its one-year-old pact with Incyte Pharmaceuticals Inc., becoming the 17th subscriber to Palo Alto, Calif.-based Incyte's multiple genetic data bases, but terms of that deal were not disclosed.
The Millennium agreement provides a payment of $118 million in committed funds for licensing and technology transfer fees. Of that, $38 million will be paid up front, and $16 million per year for five years, said Steven Holtzman, chief business officer for Millennium.
Another potential $20 million per year may come in the form of milestone payments based on research objectives yet to be established by mutual agreement, Holtzman said.
Elizabeth Silverman, an analyst with BancAmerica Robertson Stephens, of New York, said the Millennium agreement is "the biggest genomics deal ever, that's for sure."
Holtzman was confident Millennium will gain much from the pact. "Most deals are inflated with downstream milestones, or they'll have big components in equity," Holtzman said. "There's no equity here. It's strictly payments to Millennium."
As part of the collaboration, Monsanto will form a wholly owned subsidiary in Cambridge, and will hire about 100 scientists to staff the facility next year.
Millennium uses large-scale genetics, genomics, high-throughput screening and bioinformatics as its technology platform. The subsidiary's research with plants could prove useful for human applications, Holtzman said. According to the deal, Millennium retains the right to use technologies developed by the new company for non-exclusive use outside of plant and agricultural areas.
"It's unlikely you'll develop a human drug targeted to a specific corn sequence, but you can elucidate a biological pathway that gives you insight," he added. "Over time, [the subsidiary's work] will be a source of genomics technology that can proliferate throughout the organization. We'll get the benefits of entrepreneurship, of a spin-off, but we don't own it."
ChemGenics Set Groundwork For Monsanto Deal
Holtzman said the Monsanto deal is "testimony to an unappreciated aspect of the ChemGenics merger earlier this year." Millennium took over Cambridge, Mass.-based ChemGenics Inc. in a stock swap valued at almost $90 million. (See BioWorld Today, Jan. 22, 1997, p. 1.)
ChemGenics had a deal with Pfizer Inc., of New York, to develop antifungal drugs. "That led to talks with Monsanto for an antifungal crop protection program," Holtzman said. "In early September, Monsanto and Millennium said, 'Look, there's really a good fit here. Let's go for it.'"
Silverman said deals such as Millennium's with Monsanto will become more common.
"I look at this as the future of the pharmaceutical industry," she said. "It's impossible for any one organization to commercialize everything in the field, to exploit the total opportunity. There's going to be room for many of these [genomics] companies. There already are 10 public ones and a number of private ones."
Millennium has collaborations with American Home Products Corp., of Madison, N.J., for genes involved in central nervous system disorders; Eli Lilly and Co., of Indianapolis, for atherosclerosis and cancer; Roche Holding Ltd., of Basel, Switzerland, for obesity and Type II diabetes; and Astra A.B., of Sodertalje, Sweden, for inflammatory disorders of the respiratory system.
As of Sept. 30, Millennium had $72 million in cash, with a net loss of $22.9 million for the first nine months of 1997, excluding the cost of the ChemGenics merger.
Millennium's stock (NASDAQ:MLNM) closed Tuesday at $19.875, up $0.063.
Holtzman was careful to distinguish Millennium's program from the database of gene sequences and expression offered by Incyte Pharmaceuticals Inc., of Palo Alto, Calif. — with which Monsanto also has broadened its one-year-old partnership.
"People often think Millennium and Incyte are competitive," Holtzman said. "Not at all. What Millennium brings to the table is a broad, integrated overall genomics technology platform."
Monsanto Expands Incyte Pact
Under the terms of Incyte's expanded plant-genomics pact with Monsanto, the agricultural company gains access to Incyte's genetic and microbial databases: LifeSeq, which includes gene sequences and expressions; LifeSeq FL, a database of full-length genes; LifeSeq Atlas, a gene mapping database; and the LifeSeq GeneAlbum cDNA clone reagent set. Also included are the PathoSeq microbial database and the ZooSeq animal model reference database.
Randal Scott, president and chief scientific officer for Incyte, said the Monsanto deal is "the largest set of database deals we've ever done." Incyte functions in a complementary way with the likes of Millennium, he added.
"They're working with companies who are working off our platform," Scott said. "It speaks to the depth and breadth of genomics. It's a good example of win-win."
Terms of the Incyte-Monsanto agreement were not disclosed, but analysts at BT Alex. Brown Inc., of New York, estimated the expanded deal surpasses the $3 million to $8 million paid per year by Incyte's subscribers to multiple databases. Incyte could receive royalties from the sale of any products developed by using its technology.
Incyte's other recent database subscribers include Abbott Laboratories, of Abbott Park, Ill., Ariad Pharmaceuticals Inc., of Cambridge, Mass., BASF A.G., of Ludwigshafen, Germany, Bristol-Meyers Squibb Co., of New York, and Genentech Inc., of South San Francisco, Calif.
As of June 30, Incyte had $37.9 million in cash, with a net profit of $2.92 million for the first six months of 1997. The company's stock (NASDAQ:INCY) closed Tuesday at $75, up $1.125.
Monsanto (NYSE:MTC) ended the day at $42.812, up $4.312. *