Welcome to the latest edition of our weekly EuroBiotech Report. The AstraZeneca ($AZN) takeover saga continued to dominate the news agenda as it dragged on into its third week. And with opinion polls showing that the British public thinks the government should intervene in acquisitions by foreign companies, the prime minister's welcoming tone toward Pfizer ($PFE) has hardened. Sweden looks set to be among the losers if the deal goes through, but Meda (STO:MEDA-A) is determined not to add to the country's woes. Having knocked back bids from Mylan ($MYL), the Swedish pharma is lining up deals of its own. While Meda aspires to be a predator, ThromboGenics (EBR:THR) is definitely among the prey. The Belgian biotech is in no rush to be swallowed up though. Away from the M&A circus, people continued to get on with developing drugs. Soon they will have another potential source of money, with ex-Invesco star Neil Woodford--also known as the U.K.'s "biotech savior"--setting up his own £4.5 billion ($7.6 billion) fund. Forest Laboratories' ($FRX) progress with the FDA brought good news to Gedeon Richter, only for the crisis in Russia to mar its week. And more. Nick Taylor (email | Twitter)
1. U.K.'s "biotech savior" setting up a £4.5B investment fund
2. With an election on the horizon, U.K. politicians try to stand up to Pfizer
3. ThromboGenics comfy on cash cushion while deciding its future
4. Meda invokes law of the jungle as it joins M&A frenzy
5. Planned Forest filing a bright spot amid Russian gloom at Gedeon Richter
And more >>
U.K.'s "biotech savior" setting up a £4.5B investment fund
In the depths of the British biotech financing drought, the £32 billion ($54 billion) Invesco Perpetual funds run by Neil Woodford gave a boost to the likes of Circassia (LSE:CIR), e-Therapeutics (AIM:ETX) and Oxford Nanopore. Now, Woodford has struck out on his own with a £4.5 billion fund and plans to further develop his interest in small, often unquoted, biotechs.
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| Neil Woodford--Courtesy of Invesco |
The new company, Woodford Investment Management (WIM), is due to launch an equity income fund next month from its headquarters in Oxford. At WIM, Woodford will continue his strategy of making long-term investments in what he perceives to be undervalued companies. In recent years this led to Woodford's Invesco funds making a string of investments in startups--prompting Bloomberg to dub him the "U.K. biotech savior"--and the Financial Times reports such companies will be an area of focus for WIM too.
Setting up shop in Oxford positions WIM to invest in new companies emerging from the city's renowned university while also keeping an eye on developments in the other two corners of England's "golden triangle" of bioscience R&D centers: Cambridge and London. The focus is on finding small companies that have the potential to become multinationals. "The fund management industry is full of pseudo-science and mumbo-jumbo but my job is actually very simple: It is to find companies that are undervalued by the stock market," Woodford told The Telegraph.
With public and private investors in Britain deterred by the risks involved with backing biotechs, Woodford's Invesco funds saw value in the likes of Circassia, the vaccine developer that recently pulled off a £200 million IPO. Such investments, while being important to startups, were always a relatively small part of Woodford's funds, and WIM looks set to follow a similar pattern. The pharmaceutical, tobacco and consumer goods groups that formed the cornerstones of Woodford's flagship Invesco funds are expected to feature prominently in WIM's initial portfolio. - read the FT feature, Telegraph interview and Bloomberg's background
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With an election on the horizon, U.K. politicians try to stand up to Pfizer
AstraZeneca ($AZN) executives spent the week trying to convince the world their pipeline is crammed with future blockbusters. But the rank-and-file workers tasked with keeping the pipeline stocked were distracted by more personal concerns: With Pfizer ($PFE) circling, is it still worth house-hunting in Cambridge?
In an interview with Cambridge News, AstraZeneca CEO Pascal Soriot said workers relocating to the new R&D site had put the question to management this week. The concerns are indicative of how even the threat of a takeover can disrupt staff. And as it tries to hold off Pfizer--or at least hold out for a higher price--AstraZeneca has played up how much disruption an actual acquisition would cause. "A pipeline of drugs is a very delicate thing and the value can quickly be destroyed," Soriot said.
For politicians and trade unions, the bigger concern is how quickly the deal could destroy jobs. Pfizer has tried to provide reassurances, but British politicians have continued to bare their gums. Whether they can do more than make things awkward for Pfizer--starting by summoning CEO Ian Read to a hearing next week--is questionable. But with one year to go until the election and polls showing 50% of British people favor government intervention, everyone wants to be seen to be doing something.
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| U.K. Prime Minister David Cameron |
YouGov reported the public's desire for the government to decide whether foreign takeovers go ahead after polling 1,858 people. One-third of the sample thought the decision should rest with the shareholders, while 16% didn't have an opinion. The remaining 50% favored government action. Support for intervention was seen across political parties, with 51% of people who voted Conservative in the last election saying the government should interfere.
The finding perhaps explains the shift in the Conservatives' tone. Precedent and the initial reactions of Prime Minister David Cameron and his finance chief suggested the ruling party would stay out of the deal. Yet on Wednesday, Cameron told Parliament he was "not satisfied" by commitments Pfizer has made so far. Overall, though, Cameron's tone was pro-foreign investment, with the PM citing examples of similar deals that created British jobs. - here's the Cambridge News article, YouGov poll and parliamentary debate
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ThromboGenics comfy on cash cushion while deciding its future
Last month's report that a handful of top biopharma companies were weighing up bids for ThromboGenics (EBR:THR) raised the possibility of a quick sale. But management at the Belgian biotech has dismissed such talk, telling investors to expect a decision in months, not weeks.
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| ThromboGenics' CEO Patrik De Haes |
After the high hopes of 2013, the start of 2014 has been a reality check for ThromboGenics and its investors. Sales of eye drug Jetrea have fallen short of expectations, prompting ThromboGenics to look into finding a buyer for the business or a U.S. marketing partner for Jetrea. Neither outcome is imminent though. At ThromboGenics' general shareholders meeting this week, CEO Patrik De Haes emphasized that with €172 million ($239 million) in cash at the end of December and the patent for Jetrea in place until 2028, the company is in no rush to make a decision, L'Echo reports.
Waiting months to make the decision gives ThromboGenics time to start turning things round--or slide further--with the first marker of its success due in August in the first-half results. De Haes echoed comments made by Novartis ($NVS) CEO Joe Jimenez--a leading contender to buy ThromboGenics--last month, with both pinning Jetrea's early struggles on the need to change surgeons' habits. ThromboGenics' CEO admitted the company may have underestimated the scale of this task, contributing to only 7,000 U.S. patients receiving the drug last year.
The miscalculation has increased the likelihood of ThromboGenics being acquired, although De Haes stressed that this is just one possible outcome. Many investors expect a sale though, with ThromboGenics' stock up 26% since it revealed the strategic review. Even after this bump, shares are still down more than 40% since the start of 2013. - read L'Echo's article (French) and De Tijd's take (Dutch)
Editor's note: An earlier version of this story incorrectly said ThromboGenics would report sales numbers in a business update in May. Sales results will next be reported in August.
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Meda invokes law of the jungle as it joins M&A frenzy
Having spent the past month trying to shake off the attentions of Mylan ($MYL), Sweden's Meda (STO:MEDA-A) is now lining up its own takeovers. As Meda CEO Dr. Jörg-Thomas Dierks put it: "Either you eat or you will be eaten. And I think that it is quite logical that we prefer to eat."
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| Meda CEO Jörg-Thomas Dierks |
In a conference call with investors Dierks framed the appetite for M&A as a return to the strategy that built Meda and not a reactionary, defensive measure to deter Mylan from again bidding for the company. Management declined to reveal how much money is in Meda's M&A war chest, saying only that the company has "sizeable firepower" that is sufficient to buy the targets on its list. Buying the targets could cause Meda to double in size over the next two years.
Reuters reports that acquisitions helped Meda double sales between 2006 and 2008. But in recent years it has turned to smaller takeovers, picking up Jazz Pharmaceuticals' women's health products and Sequoia Capital-backed Acton Pharmaceuticals. This week marked a return to the pursuit of scale, with Dierks looking for "transformational, strategic transactions." The goal is to turn Meda into a big European pharma company.
Like the large pharma companies Meda wants to compete with, the Swedish company is looking for deals that provide "tax synergies" but said such benefits are not its primary motivation for reentering a phase of major acquisitions. The strategy is simply a reflection of Meda's Darwinian view of the biopharma industry. "You will belong to the winners or you will belong to the losers, and there is nothing in between," Dierks said. - read Reuters' take and Bloomberg's coverage
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Planned Forest filing a bright spot amid Russian gloom at Gedeon Richter
Hungarian drugmaker Gedeon Richter reported a slump in first-quarter profits as trouble in Ukraine and depreciation of the Russian rouble led to tumbling sales in key markets. And with fighting in Ukraine and the West's economic sparring with Russia intensifying, the near-term future for the company looks tough.
First-quarter profits halved, with the effect of lower revenues in Russia and Ukraine--which accounted for one-third of total sales last year--compounded by rising costs. The 20% drop in sales to Ukraine is directly tied to fighting in the country, with Richter voluntarily restricting shipments to the nation given the political turmoil and uncertain economic environment. In Russia, the depreciation of the rouble, caused in part by the Ukraine crisis, contributed to an 18% fall in Richter sales to the country.
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| Richter's Erik Bogsch |
The situation is likely to get worse before it gets better, with Reuters reporting that Richter CEO Erik Bogsch expects sales to Ukraine to drop by as much as 35% this year. "Patients have less money, the business of pharmacies has become more uncertain, everybody is reducing stockpiles and everyone is trying to brace for survival," Bogsch said. Richter has weathered crises in eastern Europe before, notably the 1998 Russian financial crash that prompted it to expand its activities outside the region.
This process is ongoing. Sales to Western Europe, the U.S. and Latin America jumped in the first quarter but collectively still amounted to less revenue than was generated in Russia. And the fruits of in-house drug discovery and development programs are still coming through. Last year's R&D pact with Orion is in its infancy, and progress in the U.S. has been slowed by the FDA's request for more data on cariprazine, the antipsychotic Richter discovered and licensed to Forest Laboratories ($FRX).
Late last month Forest said it had shared additional data with the FDA and planned to resubmit a filing by the end of the year. Richter will receive royalties on U.S. sales. The relationship led some to speculate that Richter is an acquisition target for Forest, which has inked deals to buy Aptalis and Furiex for a total of $4 billion (€2.9 billion) this year. Richter dismissed the speculation in January and, with the Hungarian state holding 25% of the company, is in a strong position to deter hostile takeovers. - read Reuters' take and the financial report
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Oxford BioTherapeutics has exclusively licensed certain antibodies generated by Amgen ($AMGN). The British biotech will use the antibodies with ImmunoGen's antibody-drug conjugate technology to create a therapy to target a protein in HER2-negative breast cancer. Oxford BioTherapeutics has yet to say which target it is pursuing. Release
The FDA cleared Britain's e-Therapeutics to resume recruiting patients into a Phase Ia brain cancer trial. The site in San Diego stopped enrolling because of a drug shortage problem. Release
Italy-based MolMed's mesothelioma drug missed its primary endpoint in a 400-person Phase III trial. The company put a positive spin on the drug's failure to increase overall survival in the entire population, noting that there was a 40% OS improvement in a subpopulation. Data suggest the drug could help patients with poorer prognoses who progressed around the time of first-line chemotherapy. Based on top-line data, MolMed thinks it could pursue a conditional marketing authorization. Release (PDF)
West Coast biotech Amarantus Bioscience opened an office in Switzerland. Amarantus will use the office as a base from which to talk to the European R&D and investment communities. Release
The Israel Securities Authority (ISA) is investigating allegations of insider trading relating to local biotech Compugen ($CGEN). ISA's investigation is focused on whether the husband of Compugen's CFO told friends and family of a deal between the biotech and Bayer ahead of a public announcement. The CFO is continuing to work at Compugen, but the company warned that it views insider trading as a serious violation and will review her position if new details are uncovered. Release
Novartis Venture Fund, Novo Ventures and Versant Ventures co-led a $37.5 million Series A round in Swiss startup Anokion. FierceBiotech
The European Investment Bank loaned Sorin Group €100 million ($139 million) to fund R&D projects in France and Italy. Sorin will use the cash to develop new medical devices for cardiac surgery and rhythm management, as well as expand into therapies to treat heart failure and mitral valve regurgitation. From 2014 to 2016 Sorin plans to invest an additional €200 million of its own money into projects in France and Italy. Release
Cytos Biotechnology laid off 24 employees and began winding down operations. Release (PDF)
A paper in the journal BioEssays examined the European DIY biology scene, a network of amateurs and semiprofessionals investigating DNA sequencing, microbial screening and other fields. The authors conclude that DIY groups are doing solid work in areas neglected by traditional researchers and the movement is set to grow. DIY groups are unlikely to evolve into startup biotechs, but the authors still think they will play a growing and useful role in the European bioeconomy. BioEssays
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Read previous editions of the EuroBiotech Report here.
