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Nov 19, 2010

Markets Waver as BTG Announces £177M Cash and Shares Acquisition of Biocompatibles

Markets Waver as BTG Announces £177M Cash and Shares Acquisition of Biocompatibles

Deal will provide BTG with new lines of drug-eluting anticancer products and pipeline.[Scott Maxwell-Fotolia.com]

  • Shares in BTG were down 8–11% in the U.K. over the course of this morning as the firm announced it would take over Biocompatibles through a £177 million (about $286 million) cash and shares deal. Biocompatibles stock, meanwhile, seesawed as the morning went on, before settling at 15% up on last night’s close, by about midday.

    Under terms of BTG’s proposed acquisition of Biocompatibles, the latter’s shareholders will receive 1.6733 new BTG shares and £0.1 in cash for each Biocompatibles share they own. The deal effectively values each Biocompatibles share at £4.30, a 28% premium on the firm’s price at close last night, and a 40% premium on the closing price in mid-September, the night before Biocompatibles first announced it had received a buyout offer. At that time it didn’t reveal who the interested party was.

    As an alternative to the cash portion of the deal, Biocompatibles shareholders may instead elect to put their faith in the firm’s Phase II-stage GLP-1 diabetes program with AstraZeneca. If the program is successful, the shareholders would receive the sterling equivalent of €0.56 per Biocompatibles share they originally owned. If the program fails, however, they would get nothing.

    Specialty pharmaceuticals firm BTG says the acquisition will provide it with a new interventional medicine platform, in the form  of Biocompatibles’ marketed oncology bead products. The combined entity would also have pro forma revenues of some £125.1 million, a broader pipeline of products being developed in house for direct sales and potential partnering, and an enlarged pro forma cash balance of some £97.3 million.

    Biocompatibles’ oncology products division markets a range of approved drug-eluting bead products for the treatment of primary liver cancer (HCC), liver metastases from colorectal cancer, and other cancers. Its distribution partners include AngioDynamics, Terumo, and Eisai. Biocompatibles also operates a brachytherapy division that is developing implants for the treatment of early-stage prostate cancer.

    Its CellMed subsidiary, based in Germany and acquired in 2005, is developing a stem cell technology-based drug-eluting bead product for the treatment of stroke and a GLP-1 analogue for the treatment of diabetes and obesity in parthership with AstraZeneca. Under terms of this agreement AstraZeneca has an exclusive option to license the relevant GLP-1 IP for exploitation in the field of diabetes and obesity at any time during the course of the product-development program, which CellMed is carrying out to the end of Phase IIa.

    On the exercise of the option-to-license, AstraZeneca would pay a license fee of €25 million and would assume financial and management responsibility for the program. Further milestones of €37.5 million would be payable prior to the first sale of product.

    In September Biocompatibles confirmed it had started the treatment of an initial group of type 2 diabetes patients in the third of four studies in the CM3 development program for GLP-1. The fourth trial will be in a larger group of patients and is expected to start later this year and be concluded in the first half of 2011.

    In August the company reported promising data from a Phase I/II study evaluating its DEBIRI (drug-eluting beads loaded with irinotecan) product in patients with liver metastases from colorectal cancer. The data prompted FDA to grant approval to continue the trial into a randomized Phase IIb study.

    Biocompatibles reported overall revenues of £17 million in the first half of 2010 (to June 30), up 24%. Gross profit was £13.4 million.

    BTG’s current marketed products include its BeneFix® recombinant Factor IX therapy for hemophila B and CroFab™ and DigiFab™ antidotes to snake venom and digitalis poisoning. The marketed drug Campath® is a humanized antibody for the treatment of B-cell chronic lymphocytic leukemia.

    BTG acquired CroFab, DigiFab, and Voraxase as a result of its 2008 buyout of Protherics, through a cash and shares deal that valued the firm at £218 million. The firm’s lead in-house candidate, Voraxase, has been developed as an adjunctive treatment to reduce toxic levels of methotrexate in cancer patients with impaired renal function. Already available on a named patient basis in Europe and the U.S., the drug’s BLA is being submitted to FDA on a rolling basis, with the last part of the data package anticipated for filing around mid-2011.

    BTG’s varicose veins therapy Varisolve® started in Phase III trials in the U.S. in September, and an NDA submission is anticipated in 2012, BTG states. The firm plans to market and sell Varisolve directly in the U.S. reimbursed sector and is looking to partner the product for the U.S. aesthetic market and rest-of-world territories.

    Additional in-house products in earlier clinical development include an injectable paclitaxel gel therapy for esophageal cancer along with drug candidates for treating hypertension, multiple sclerosis, and pain/inflammation

    BTG has a broad pipeline of partnered programs against diseases including cancer, multiple sclerosis, chronic lymphocytic leukemia, Alzheimer disease, and severe sepsis. Campath is currently also in Phase III multiple sclerosis trials in collaboration with Genzyme. The anticancer drug abiraterone is being partnered with Cougar Biotechnology, which was bought by Johnson & Johnson, and is also in Phase III. The type 1 diabetes therapy candidate otelixizumab is in Phase III development in collaboration with Tolerx and GSK.

    In the six months to September 30, BTG  reported revenues of £46.1 million, comprising £31.3 million in royalties from product sales by its distribution partners, and direct product sales of £14.8m. BTG has in addition established its own commercial operations to sell CroFab and DigiFab, having just reacquired the sales and marketing rights to both drugs from its partner Nycomed, in October.


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