By Debbie Strickland
For an initial equity investment of $2.5 million, Cambridge, Mass.-based Genzyme Corp. has secured a 50 percent interest in a kidney-failure drug that passed two Phase III clinical trials and will be submitted for FDA marketing approval in the fourth quarter.
Genzyme and GelTex Pharmaceuticals Inc., of Waltham, Mass., are forming a 50-50 joint venture to handle the final development and commercialization of GelTex's RenaGel non-absorbed phosphate binder, which controls the elevated serum phosphorus levels that cause serious complications in chronic kidney failure patients.
GelTex could receive up to $27.5 million tied to FDA approval of the product.
Without this product, "physicians must choose between high phosphate and high calcium, and the problem is they have to constantly adjust treatment and it results in sub-optimal therapy," said Mark Skaletsky, GelTex's president and CEO.
RenaGel could enter the U.S. market as early as late 1998.
"We've taken this product from initiating Phase I studies in the third quarter of 1994 to filing a [new drug application] within 3 years," Skaletsky noted, praising his company's work force.
The joint venture, dubbed RenaGel LLC, will have worldwide commercialization rights to RenaGel, except in Japan and certain Pacific Rim countries, where GelTex has licensed rights to Chugai Pharmaceutical Co. Ltd., of Tokyo.
In addition to the FDA new drug application (NDA), the company will apply for European approval next year of the capsule formulation of RenaGel.
RenaGel Market Potential More Than $200M
Revenues of $230 million are possible in 1998, according to analyst Peter Drake, of Vector Securities International Inc., in Deerfield, Ill.
"We think [the joint venture] is very positive for both companies," he said.
Although Genzyme earnings estimates have been revised downward slightly for 1997 and 1998 because of costs associated with the joint venture, Drake expects the new business to be "highly accretive to Genzyme's earnings in 1999 and 2000," generating year 2000 profits estimated at $79 million.
"[The venture] underscores Genzyme's strong corporate development effort," he said, and is also "a good deal for GelTex."
For GelTex, the venture provides marketing for its first product, while allowing the company to retain 50 percent of the profits.
"It's a better deal than you would typically see, but there's good reason for that," said Barbara Hoffman, analyst for Vector Securities International. "RenaGel's clinical trials have been completed and the NDA is ready to be filed."
GelTex could become profitable by late 1999 or 2000, she added.
RenaGel LLC is Genzyme's second such venture in a year. In September, the company formed a joint venture with Diacrin Inc., of Charlestown, Mass., to develop and commercialize NeuroCell-PD for Parkinson's disease and NeuroCell-HD for Huntington's disease.
These programs are at the Phase I trial level and Genzyme is contributing 80 percent of the first $50 million in funding.
The GelTex agreement calls for Genzyme to pay GelTex $27.5 million, consisting of a $2.5 million equity investment (100,000 unregistered shares of common stock at $25 per share), a $15 million payment upon FDA marketing approval, and a $10 million payment one year following FDA approval.
GelTex will contribute RenaGel and the product's underlying patents and technology to the venture, as well as GelTex's expertise in the area of chronic renal failure. Genzyme will use its existing business operation to handle sales, marketing, reimbursement, patient support and international regulatory activities. Some new employees will be added, particularly in the company's specialty therapeutics unit.
The new company will not be housed in a separate facility; marketing will be run at Genzyme and research and development at GelTex. Dow Chemical, of Midland, Mich., will manufacture RenaGel, although Genzyme may assume some of that responsibility in the future.
Share Price Of Both Firms Increased
Officials with both companies likened RenaGel to Ceredase and Cerezyme, which Genzyme's specialty therapeutics unit currently markets for the treatment of Gaucher's disease.
As with those drugs, with RenaGel, Genzyme has "a very well-defined patient population, a very well-recognized and important medical problem, and a fairly well-concentrated market," said Greg Phelps, executive vice president at Genzyme. "It's a high-value, serious medical problem."
News of the joint venture lifted the share prices of both companies. GelTex (NASDAQ:GELX) closed Wednesday at $18.50, up $1.50, or 8.1 percent. Genzyme (NASDAQ:GENZ) finished the day at $25.859, a gain of $1.859.
Genzyme's shares have climbed 13.7 percent since the June 11 release of data from a Phase III study of Thyrogen, the company's recombinant thyroid stimulating hormone. (See BioWold Today, June 12, 1997, p.1.)
"Results of the trial were overwhelmingly positive," Drake wrote in a report the next day. "We believe that Genzyme is on track for a regulatory filing later this year, with an approval in 1998."
He projected Thyrogen revenues of $9 million in 1998. *