Medivir commits to splitting commercial, R&D units into independent businesses

Medivir is pushing ahead with previously mooted plans to cleave its business in two. The action will see the Johnson & Johnson ($JNJ)-partnered drug developer split its operation into two independent companies, one of which will gain its pipeline programs, the other of which will take responsibility for its commercial unit.

Stockholm-based Medivir (STO:MVIR-B) floated the idea in June and, after evaluating the plan for several months, has now committed to executing the strategy by the end of the year. One of the companies will own Medivir’s portfolio of commercial products, which includes J&J-partnered hepatitis C drug Olysio and a clutch of established, locally sold products acquired in the 2011 takeover of BioPhausia. This commercial business plans to list shares on First North Premium.

Carving out those commercial products into a new company will leave a biotech behind. The pipeline of the as-yet-unnamed independent biotech will include MIV-711, a cathepsin K inhibitor Medivir is testing as a treatment for osteoarthritis in a Phase II trial. Aside from a J&J study of Olysio as part of a triple combination therapy, MIV-711 is the only program in Medivir’s clinical pipeline today.

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That will change when nucleotide NS5B polymerase inhibitor MIV-802 advances into the clinic. Trek Therapeutics recently picked up the rights to MIV-802 in most markets, meaning the biotech that spins out of Medivir will be freed of the burden of developing the drug and positioned to rake in milestones.

The flip side of the situation is that the biotech will have a fairly thin in-house pipeline. Medivir is working on treatments for HIV, respiratory syncytial virus and hepatocellular carcinoma, but none of these programs has advanced beyond the discovery stage.

Medivir has concluded that the best way to get a fair valuation from investors for these assets and the commercial drugs is to separate them out into two independent companies. Investors have driven the value of Medivir up and down several times during the company’s 20-year life on public markets as enthusiasm for its assets has waxed and waned. With Olysio being blown out of the water by Gilead’s ($GILD) hepatitis C franchise, enthusiasm is currently at a low ebb.

Faced with this situation and other challenges, investors have welcomed the split plan, driving the stock up 30% since it was first suggested. The stock rose 6% after Medivir confirmed it would go ahead with the separation.

Whether the split ultimately proves to be a success for those who own stakes in the biotech will depend to a large extent on MIV-711. Medivir expects to have data from a Phase II trial of the drug in the second half of 2017. And, if the biotech sticks to the Medivir playbook of outlicensing after Phase II, that readout could shape its midterm prospects. Medivir has yet to disclose financial details of the split, such as how the biotech will be financed.

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