Monday, July 26, 2010

Brewing Genzyme Takeover Battle Highlights Value of High-Impact Drug Innovation

Orphan disease drug developer Genzyme had emerged as the drug development of the future by developing innovative drugs which have a high impact for diseases of major unmet medical need and then being rewarded for it with exceptional pricing power. Recent manufacturing problems, however, has led to the business model being forgotten over regulatory angst and activist shareholder actions. Sanofi-Aventis probably simply could not resist the depressed share price and was the first to blink, with others, like GSK, quickly moving in from the sidelines.

That high-impact innovation is a critical part of Pharma’s strategy in the face of its small molecule patent cliff freefall should be obvious. GSK, after announcing an orphan disease initiative last year, for example has entered into microRNA and antisense collaborations with Regulus, Santaris, and ISIS, and Sanofi-Aventis has just entered into relationships for microRNA therapeutics with Regulus and a quite significant one with Oxford Biomedica last year for the development of gene therapies for ocular indications (note: Genzyme is one of the more prominent gene therapy companies). Meanwhile, Pfizer and probably almost every other major pharmaceutical corporation are also building orphan disease capabilities.

I think the action around Genzyme illustrates how quickly investor sentiment towards a company or an entire industry like RNAi Therapeutics can change. It is not that Big Pharma can delay their future planning forever, and should an opportune situation arise they are likely to act quickly.

What I find curious about Genzyme though is that they are really platform agnostic, and I believe that caused some pipeline problems and contributed to Genzyme’s weak stock market performance in recent years after some of the low-hanging fruits had been picked.

Of course, this, as illustrated by ‘Genzyme-like’ opportunities like Alnylam’s ALN-TTR, is where the big opportunity is for RNAi Therapeutics. As treatments become individualized down to the gene level, the druggable genome size and and platform efficiency become major issues. In fact, going after Genzyme may actually be a mistake stemming from Big Pharma’s age-old temptation to pay top dollars for growing top-line revenues. Big Pharma does not need (orphan) drug development expertise, which is where it can well compete with biotech companies anyway, but innovative platforms to complement such expertise.

In any case, this should lift the entire biotech sector, and a similar spark, possibly with a Swiss flavor, may soon ignite RNAi Therapeutics.

4 comments:

Anonymous said...

Guru

I give you 100,000...you have 2 choices..TKM or ALNY..you can't buy them both...

Where to??

Anonymous said...

take the 100,000 , buy ALNY and
thank your generosity.

next day, quietly offload 60,000 worth of ALNY, buy 40,000 of TKM, 20,000 of Benitec and sit tight.

Dirk Haussecker said...

It really depends on the needs of a Big Pharma. If you believe you already have access to RNAi triggers (a long discussion), then you need delivery, and Tekmira IMO is the best place to start with. Alnylam's potential weakness is that it is apparent that many types of dsRNAs can induced RNAi gene silencing, so workaround claims are not just that. For delivery it is another thing as for systemic delivery of synthetic siRNAs, I have not seen much that comes close to SNALP and Tekmira's know-how, and as Big Pharma tests/compares the various technologies I would think they should come to the same conclusions.

Alnylam at $37 could have easily acquired Tekmira (and I would have supported the issuance of shares for that), now it has become more difficult. I wonder what Alnylam shareholders feel about the potential value of acquiring Tekmira at this point.

Anonymous said...

Dirk,

You recently mentioned that you might have more to comment re; MRNA, now Marina Biotech after the merger with Cequent. Please share some of your insight and strategic thinking regarding the combined two companies. Are you interested in starting a position at the (post 4 > 1 split) current share price in Marina? There is a potential NASDAQ listing? Does Marina have a possibility to be added to your Biotech Portfolio? Thank you for your thoughts, joe. ny11934@yahoo.com

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