M&A: Panning for Gold - Pharmaceutical Executive

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M&A: Panning for Gold
The industry must sift through the small pharmas and biotechs that are powering the engine of drug discovery. But searching for the right partner company can be like...


Pharmaceutical Executive


Woburn, MA–based ArQule is setting its sights on the c-Met target with its compound ARQ-197. Some have speculated that this c-Met inhibitor can emerge as a best-in-class drug because of its superior safety and broad activity profile across several cancers, including colorectal cancer. "They presented the Phase I data at ASCO, and it was very exciting," says Cantor Fitzgerald'sZavoico. Although the company has partnered with Kyowa Hakko Kogyo, which will sell the product in Japan and Asia, it has retained the rights in North America and is currently searching for a partner.

DIAGNOSTICS: BEYOND BLOOD TESTS

Diagnostics—and, in particular, molecular diagnostics that analyze an individual's genotype—are seen as the key to unlocking the paradigm of personalized, and, one day, preventive, medicine.

Certainly, of the Big Pharmas, Roche has had the dominant foothold in the area. In 2007 alone, the company added Bioveris, 454 Life Sciences, and Nimblegen, which gives it new capabilities in molecular diagnostics, including the ability to quickly sequence individual genomes.

Novartis got into the game when it acquired Chiron in 2005 in a $5.4 billion deal. It has charged its diagnostics chief with developing molecular diagnostics—a business it plans to grow by at least 40 percent in head count in the coming year.

All diagnostics, however, are not created equal. The deal market is directed at companies with genomic screening capabilities. Just ask GE Healthcare, which made an $8 billion bid to acquire Abbott's diagnostic business without its molecular diagnostics division—only to back out, according to several sources, because there wasn't enough value in the deal.

Instead, acquisition targets are more likely to be the molecular diagnostics companies that have the tools to create personalized medicines. Ones to watch include Illumina, CardioDx, XdX, and Beckman Coulter. These companies specialize in determining variation in genetic sequences, finding which proteins are present in cells and how they interact, and helping to identify which patients will benefit most from a particular therapy.

Genomic Health is also a standout in the field, with their Oncotype DX test on the market to predict the probability of breast cancer recurrence and one in development to predict the possible resurgence of colon cancer. But unlike the rest of cash-hungry pharmas, the company is not interested in selling. "There is tremendous value in Oncotype DX in that it also predicts chemotherapy benefit, which its competitors do not," says Zavoico. "They've figured out a business plan that works, they're thinking outside of the box, and not licensing anything out. They want to proceed on their own."

Another big opportunity for companies comes from leveraging companion diagnostics through better partnerships. "The pharma industry spent the last 25 years trying to get rid of diagnostics and focus on therapeutic drug areas, and now it is reintegrating diagnostic areas," says Steven Burrill. "It is saying we are going to live in a world of 'theranostics' where the Dx is tied to the Rx to get a drug approved and into the market."

Theranostics are interesting because they provide marketing synergy. Physicians are more likely to give a rep time if he has novel assays to offer, and diagnostic tests can better prove the pharmacoeconomic value of a drug to payers.



Case in point is Maraviroc, a Pfizer drug, which received FDA approval to treat patients whose HIV virus enters cells using the CCR5 co-receptor. Patients can now take a test called Trofile from Mongram Bioscience, which lets them know if Mavarivoc would work for them.


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