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Deal Offers Novartis a Foothold in Hepatitis Viral Drugs
NY Times
By ALISON LANGLEY and ANDREW POLLACK
March 27, 2003
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Novartis, with its decision to pay $255 million for a majority stake in a modest biotechnology company, is gaining a foothold in the fast-growing market for drugs to treat viral diseases like hepatitis and AIDS.
Novartis, the Swiss drug giant, will buy 51 percent of Idenix Pharmaceuticals, whose operations are in Cambridge, Mass. It will also pay $75 million to license the rights to two Idenix hepatitis B drugs, which are now in clinical trials. And if various milestones in drug development and sales are achieved, Novartis may pay hundreds of millions more.
The agreement gives Novartis access to research "in an area with a high unmet need and big market potential," Daniel Vasella, its chairman, said in an interview yesterday. Buying control of Idenix was more effective than building a research effort from scratch, he said.
For Idenix, the deal would provide a return for its venture capital investors and executives at a time when going public is extremely hard. Last April, Idenix filed to raise $115 million in an initial offering, but dropped its plans in December.
The company's lead drug, telbivudine, is in the final stage of clinical trials for hepatitis B and could reach the market as early as 2006. Some data from earlier trials showed it to be more potent than lamivudine, a GlaxoSmithKline drug with which it would compete. The other Idenix hepatitis B drug, valtorcitabine, is in early clinical trials.
Most cases of hepatitis B are in developing countries, which could limit sales of a drug. Novartis seems to be as interested in an Idenix once-daily oral drug for hepatitis C, which has just entered clinical trials. Novartis would pay Idenix shareholders an addition $357 million for its 51 percent stake if that drug makes it to the point at which regulators agree to review applications
for approval.
"The hepatitis C is really the key indication," said Jean-Pierre Sommadossi, chief executive of Idenix. The drug, known as NM283, is one of the first experimental treatments in the industry intended to directly inhibit the hepatitis C virus in the same way many AIDS drugs inhibit H.I.V.
The deal with Idenix could bring Novartis into competition with Roche, its crosstown rival in Basel, which sells alpha interferon to treat hepatitis C. Novartis owns 32.7 percent of Roche.
Idenix, which is five years old, has received investments of about $69 million until now, led by MPM Capital, which owns more than a third. Ansbert K. Gadicke, founding partner of MPM, said that biotechnology companies in the past might have gone public with drugs in early stages of development. But with stock offerings as difficult as they have become, venture firms must
now be able to sustain a private company until it reaches the late stages of clinical trials.
By buying only part of Idenix, Novartis hopes to allow it to remain entrepreneurial. This type of semi-independence is common, as with Novartis's investment in Chiron.
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