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Insight & Intelligence : Nov 3, 2010
Tales from the Biotech Crypt: Sam Waksal Is Back in Business
Former ImClone CEO has started a new firm, made three acquisitions including Three Rivers, and begun licensing.!--h2>
On October 25, Kadmon Pharmaceuticals reported that it had bought Three Rivers Pharmaceuticals and that its treatments for hepatitis C infections and cancer would form the backbone of a new enterprise conceived of and headed by former ImClone Systems CEO, Sam Waksal, Ph.D.
If successful, Kadmon would resurrect Dr. Waksal’s storied career as a biotech entrepreneur. And his previous track record of bringing a significant anticancer drug that produced piles of money for its backers at ImClone won’t hurt, and potential profits may mitigate concerns about confabulation.
Kadmon has been in acquisition mode, having bought, to date, PhytoCeutica, Flux Therapeutics, and Three Rivers Pharmaceuticals. It also licensed an anticancer drug from Exelixis and an HCV therapy from Valeant Pharmaceuticals and says it has more deals in the works.
The various agreements are intended to put the company into play as a “fully integrated pharmaceutical company,” a cobweb-laden phrase popular in the early days of biotech start-ups when few companies foresaw that taking a drug from discovery all the way through registration took pharma company-type funds.
Dr. Waksal’s Background
Dr. Waksal’s previous tenure as a biotech CEO culminated in the successful development of Erbitux, an anti-EGFR chimeric mouse/human antibody for metastatic colorectal cancer and head and neck cancer. The FDA first approved the drug, in combination with irinotecan, in 2004 for metastatic colorectal cancer.
Before that success, in 2002, Dr. Waksal was arrested on insider trading charges and eventually pled guilty to securities fraud, bank fraud, obstruction of justice, and perjury. In 2003, he also pled guilty to conspiracy and wire fraud. He was sentenced to seven years in prison and had to pay $4 million in fines and back taxes. Dr. Waksal was released in 2009 after serving about five years of a seven-year, three-month sentence.
While Dr. Waksal can’t be an officer at a publicly held company again, he can start a private business venture. David Pitts, a spokesperson for Kadmon, said that debt and equity offerings had raised more than $200 million, with the biggest investor being SBI Holdings of Japan. Dr. Waksal friend, business associate, and long-time investor, Carl Icahn, who eventually gained control of ImClone, declined to chip in as Kadmon passed the hat around this time.
Icahn made his first major move in the biotech arena when he took over ImClone after winning a 2006 proxy contest that allowed him to elect four members of ImClone’s board. Most recently he has shown an interest in Genzyme, and some analysts say that his Genzyme takeover attempt is basically ImClone redux.
In 2008, after Icahn gained a majority of ImClone’s shares, he engineered the sale of the company to Eli Lilly for $6.5 billion, or $70 a share, 33% more than what ImClone was trading at the day before the news.
Eli Lilly beat out Bristol-Myers Squibb (BMS), which had offered $62 per share, valuing ImClone at $4.7 billion. Lilly recognized total Erbitux revenues of $390.8 million for 2009.
Side Bar: Icahn's Current Interests
Icahn now controls two seats on Genyme’s board, and Henri Termeer, Genzyme CEO, has enrolled activist shareholder Ralph Whitworth as a board member. Genzyme is the biotech industry’s second-largest company, with revenues of $4.5 billion and a market capitalization of about $13 billion.
Neither Icahn nor Genzyme is likely to settle for the company’s most recent offer of $69 per share tendered earlier in October by sanofi-aventis. In comments during sanofi-aventis’ third quarter investor call, CEO Chris Viehbacher said he’s not budging on his offer. Sanofi-aventis took its offer for Cambridge-based Genzyme hostile on October 4, and it expires December 10.
PhytoCeutica, Flux Therapeutics, and Three Rivers Pharmaceuticals have given Kadmon a toehold in drug discovery for cancer and infectious diseases. PhytoCeutica develops traditional Chinese medicine into FDA-approved prescription drugs for cancer. Its platform technology assesses botanical quality control and reproducibility.
PhytoCeutica’s lead product, PHY906, is being studied along with capecitabine in patients with advanced pancreatic cancer at U.S. sites. It was shown in early clinical trials to help control severe diarrhea caused by chemotherapeutic agents. Additionally, in preclinical studies PHY906 with irinotecan in a mouse model of colon cancer resulted in a synergistic reduction in tumor burden, maintenance of body weight, and stem cell regeneration in the intestinal mucosa.
Kadmon’s deal with Exelixis adds another potential cancer drug to its pipeline. XL844 is an inhibitor of Chk 1 and 2, protein kinases that induce cell-cycle arrest in response to a variety of DNA damaging agents. The drug also inhibits two vascular endothelial growth factor receptors known to be involved in tumor angiogenesis.
Three Rivers Pharmaceuticals gives Kadmon a commercial presence in the hepatitis C market with its ribavarin products, Ribasphere® Tablets and Ribasphere RibaPak®, and Infergen®. Interestingly, Three Rivers bought all the rights to Infergen from Valeant Pharmaceuticals for $70.8 million in up-front cash and up to $20.5 million in two noncontingent payments in a deal that closed in 2008.
On November 1, Kadmon snagged Valeant’s remaining HCV interest through an exclusive, worldwide license with the exception of Japan to Valeant’s taribavirin. It is a form of ribavirin that may have fewer side effects. Kadmon is paying $5 million initially, with other payments possible later, to Valeant.
In a second deal Valeant will pay $7.5 million for rights to sell Kadmon’s ribavarin in six central European countries, to be marketed as part of Valeant's branded generics line.
Ontario-based Valeant, known as Biovail before it acquired U.S.-based Valeant this year, has refocused its business on central nervous system disorders and dermatology.
With its Flux Therapeutics acquisition, Kadmon gained access to a drug discovery technology based on a bioinformatics platform that identifies potential drug targets for pathogens using genome-scale flux balance analysis (FBA). FBA is a computational method to analyze reconstructions of biochemical networks for identification of potential drug targets, for example, metabolic pathways in multiple strains of the same bacteria to identify novel antibiotic targets.
Spinning all of this into a formula for potential success, Dr. Waksal said this of Kadmon’s business strategy: “The company is building a new paradigm for bringing pioneering medicines to market more rapidly and cost effectively. This includes the simultaneous execution of a dual strategy, combining an operating commercial business with novel compounds at various stages of clinical development."
The company believes that Three Rivers, having already established a commercial presence in HCV, provides both an immediate cash cow to fund novel drug development and a ready-made market for novel drugs. Flux’ platform technologies could find complementary or replacement therapeutics as this market matures and new drugs well down the road to approval are introduced.
“Hepatitis treatment is on the verge of major change,” noted Dr. Waksal. “With Three Rivers as a cornerstone, Kadmon will play an important role in the evolution of this global market.” He further said that the acquisition would provide Kadmon “with a strong commercial platform from which to expand our pipeline of novel therapies in oncology, infectious diseases, and immunology."
And current hepatitis interferon-based treatments such as Three Rivers’ versions of alpha interferon and ribavarin are likely to be around for awhile as they will continue to be used with emerging therapies like Telaprevir.
As for Kadmon, in describing the company’s prospects, Dr. Waksal told the New York Times, "You'll see a company that next year will be doing significant revenues in a growth area, with earnings, probably five Phase III programs, and a couple of Phase II products." Whether this optimistic prediction becomes another tale from the biotech crypt or a new, successful company and a significant source of profits for its investors remains to be seen.
Patricia F. Dimond, Ph.D. ([email protected]), is a principal at BioInsight Consulting.
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