Changes in Big Pharma
Pharmacia exec says failed big drugs could move firms out of field completely.
February 20, 2002: 4:42 p.m. ET
|
NEW YORK (CNN/Money) - A top executive at Pharmacia Corp. said Wednesday that if biotech ImClone's cancer drug Erbitux is not approved, ImClone's partner, Bristol-Myers Squibb, could stay out of cancer treatment altogether.
Bristol-Myers (BMY: up $0.75 to $45.82, Research, Estimates) paid $1 billion for a 20 percent equity stake in ImClone (IMCL: down $1.42 to $17.89, Research, Estimates) at $70 per share and also agreed to milestone payments totaling $1 billion to market Erbitux.
Erbitux has been plagued with controversy, with class action suits filed against and informal federal investigations of ImClone coming after the drug was initially rejected by the Food and Drug Administration.
Bristol-Myers is still pushing for the drug to be approved, though, despite attempts to get ImClone to restructure the original deal.
"The BMS deal with ImClone will probably decide if BMS is an oncology company or not," said Thomas Picone, Pharmacia (PHA: up $0.65 to $40.11, Research, Estimates) vice president for licensing.
Speaking at the Biotechnology Industry Organization conference in New York, Picone said there is a fundamental shift in the pharmaceutical industry with only 24 drugs approved by the FDA last year, about half the number of previous years.
That's putting pressure on Big Pharma to find late-stage products with big potential and to move on to an entirely new field if that doesn't work out, he said.
"As a $13 billion company, how are you going to grow 10 percent (each year)?" he said. "You need a $1.3 billion increase. That's a blockbuster and a half."
"Maybe if you lose your top oncology product, you move on and become a cardiovascular company," he added.
Check out drug stocks here
Christopher McLeod, vice president for corporate development at drug discovery firm CuraGen (CRGN: down $0.29 to $16.71, Research, Estimates), said Bristol-Myers' trouble with Erbitux could make big drug companies more cautious about spending big sums on such late-stage product deals.
"If you look at BMS and ImClone and the possibility of BMS paying significantly over, you have to ask is there going to be a pharma bank?" McLeod said.
Alison Taunton-Rigby, president and CEO of privately held Forester Biotech, also said accumulation and consolidation by big drug companies is hitting the high point of a cycle but will thin out in the future.
"We've just come off a very bad few years where the biotech industry was starved for cash," Taunton-Rigby said. "Today we're a well-funded industry as pharmaceutical companies are in dire need of late-stage products."
But in five years those drug companies will be selling off the pieces they accumulated, she said.
Pharmacia's Picone agreed there would be selling, but it would be strategic as the earnings stream of large companies depends on smaller but dependable high-margin products. 
|
|
|
|
|
|
|
