Venture Firms Feel The Pain With GlaxoSmithKline Spin-Off

Pharmaceutical companies are reevaluating their portfolios and dispensing with products that are no longer priorities. That is creating opportunity for venture firms to launch companies around compounds that have been studied extensively.

After GlaxoSmithKline PLC decided to exit neurological fields such as pain and depression in February, three venture capital firms jumped on the chance to carve out a business from GSK focused on the pain market. These firms - Apposite Capital, New Leaf Venture Partners and SV Life Sciences - injected $35.4 million in Series A financing for the new company, called Convergence Pharmaceuticals Ltd., to finance Phase II proof-of-concept studies for a treatment for chronic, neuropathic pain.

New Leaf especially appears to be making the most of these cast-offs. Last year, the firm teamed up with Domain Associates, Pappas Ventures and Third Rock Ventures to invest in $23 million in Afferent Pharmaceuticals Inc., which spun out of Roche Holding Ltd. late last year to attack chronic pain in a new way.

New York-based New Leaf also joined Domain, Aisling Capital, Canaan Partners and Sofinnova Ventures in December to acquire an antibiotic from Pfizer Inc. that has been tested in more than 1,000 subjects. The investors now plan to drive this drug, dalbavancin, through Phase III clinical trials. That opportunity came about after Pfizer acquired Wyeth in October.

Drug manufacturers once feared embarrassment if they let go of an asset that turned into a success. But through mergers and internal discoveries, most have now accumulated far more drugs than they can develop. Instead of letting them idle, many are looking to sell or license them out.

In Convergence’s case, GSK began research that led to the pain drugs in the late 1990s, according to Chief Executive Clive Dix, who headed U.K. research for the company at the time. Strong demand exists for pain medicines that work through new mechanisms of action. Convergence hopes its lead product, a sodium-channel blocker called CNV1014802, will be just that.

Though GSK still owns 18% of Convergence, it does not have any rights to the company’s products, Dix said. He previously led venture-backed PowderMed Ltd. to a merger with Pfizer Inc. in 2006.

Convergence’s team also includes Chief Scientific Officer Simon Tate, who previously was vice president in the pain and epilepsy discovery performance unit within GSK’s Neurosciences Center of Excellence for Drug Discovery.

Noven Pharmaceutical sale finalized

Hisamitsu Pharmaceutical Co. completed its $428 million purchase of Miami-based Noven Pharmaceutical, the companies said Friday.

Hisamitsu agreed to buy Noven on July 14 for $16.50 per share, which was a 22.4 percent premium to the most recent closing price for Noven stock.

Noven is now a wholly owned subsidiary of Hisamitsu U.S. It will keep its name, work force and current locations and remain a stand-alone unit. Noven shares will no longer trade on the Nasdaq Stock Market after Friday.

Noven's products include Vivelle-Dot estrogen patch, which is sold through a partnership with Novartis AG, and Daytrana, an attention deficit hyperactivity disorder patch licensed to Shire PLC.

Vaccine makers boost U.S. pharma stocks

BOSTON - Vaccine makers helped boost the U.S. pharmaceutical benchmark index early Friday as shares of GlaxoSmithKline PLC (GSK 36.75, +0.19, +0.52%) , AstraZeneca PLC (AZN 43.34, +0.05, +0.12%) , Novartis AG (NVS 42.00, +0.05, +0.12%) and Sanofi-Aventis (SNY 33.37, +0.14, +0.43%) all gained in the wake of Thursday's declaration of a formal flu pandemic by the World Health Organization. The Amex Pharmaceutical Index (DRG 260.48, +3.17, +1.23%) rose 1% to 259.95 while the Amex Biotechnology Index (BTK 683.44, -5.46, -0.79%) slid 1.5% to 678.74. The Dow Jones Industrial Average back-tracked about 25 points to 8,747.

Two U.S. IPOs Lined Up For June

Two IPOs are lined up for the U.S. markets this month, with a medical data software company and a Chinese water treatment equipment supplier preparing to go public.

The first initial public offering that is expected, from New York-based Medidata Solutions Inc., is scheduled to begin trading June 18 on the Nasdaq under the symbol MDSO. The other, Beijing's Duoyuan Global Water Inc., is slated to launch on the New York Stock Exchange under the symbol DGW some time during the week of June 22. Both offerings are small; Medidata is seeking to raise as much as $82 million, while Duoyuan is aiming for $75 million.

So far, June appears to be shaping up as a repeat of April and May in terms of U.S. IPO volume; there were three deals completed in each of those months.

Medidata Solutions makes software that pharmaceutical and medical-device companies use to manage information from their clinical trials; its customers include Johnson & Johnson (JNJ), AstraZeneca PLC (AZN), Amgen Inc. (AMGN), Astellas Pharma Inc. (ALPMF) and Takeda Pharmaceutical Co. (TKPHF). Although its revenue has been rising rapidly, the company has a history of annual operating and net losses dating back to its inception.

Duoyuan Global Water, which distributes its water treatment equipment throughout 28 Chinese provinces, shows both revenue and profit gains. Revenue rose 40% on increased product demand and net income jumped 63% in 2008 compared to 2007. The company cites population growth and industrialization as factors that are driving demand for water treatment in the country.

Alliance Boots to Cut 1,500 Jobs

LONDON - Alliance Boots PLC said Monday it is cutting about 1,500 jobs across its pharmaceutical-wholesale division in response to intense competition, difficult market conditions and major regulatory changes in some European countries.

The European pharmacy and beauty-products company recently started restructuring the division. A quarter of the 1,500 jobs have already been cut in the year ended March 31, said Finance Director George Fairweather. The job losses across the division will mean a 10% cut in headcount over the next 12 months.

Associated Press

Alliance Boots said it is cutting about 1,500 jobs at its wholesale pharmaceutical division.

The job losses overshadowed a sharp rise in net profit and sales for the 12 months ended March 31, lifted by a solid performance at Boots's Health & Beauty division and by acquisitions in Germany and France.

Annual net profit jumped to £101 million ($153.2 million) from £10 million a year earlier, helped by a 45% rise in revenue to £17.20 billion from £11.87 billion.

Alliance Boots, which is owned by private-equity firm Kohlberg Kravis Roberts & Co. and businessman Stefano Pessina, booked a 12% rise in trading profit, including its share of associates and joint ventures, to £953 million.

The company's health-and-beauty division, which includes Boots U.K., posted a 12% increase in annual trading profit, while its pharmaceutical-wholesale unit booked a 4.4% increase. The pharmaceutical-wholesale division's restructuring, however, produced charges of £60 million, but is expected to cut operating costs by around £55 million annually by fiscal 2012.

Alliance Boots generated £1.05 billion of cash in fiscal 2009 and had net debt of £9.03 billion at the end of March.

Alliance Boots operates more than 3,200 health and beauty-retail outlets in nine countries, of which over 2,900 have a pharmacy, according to its Web site. The company's wholesale and distribution network serves more than 135,000 pharmacies, doctors, health centers and hospitals from over 370 pharmaceutical-wholesale depots in 15 countries.

10 Utahns, 2 others sue pharmaceutical company

Ten Utahns and two people from Oregon filed federal lawsuits Thursday against the pharmaceutical giant GlaxoSmithKline PLC alleging that the company was negligent in researching the drug Avandia, which caused them (or a spouse) to have heart attacks and subsequent health problems.

The lawsuits state the firm deceived doctors and the public about the possible health risks of this drug and two related medications, Avandaryl and Avandamet. All three medications have been used to treat type 2 diabetes. The lawsuits also allege that the firm knew about the "defective nature" of these medications but continued to market them to "maximize sales and profits at the expense of public health and safety."

The Food and Drug Administration approved Avandia for use in 1999. However, the FDA issued a safety alert in 2007 indicating that clinical trials showed that there was a significantly increased risk for heart attacks or other heart-related ailments in people who consumed Avandia.

The lawsuits were filed by Rema Ahlstrom of St. George, David Drummond of Roy, Janice and Kenneth Gurney of Aurora, Mickael and Denise Dunkley of Ogden, Phyllis and Brown Kaplar of Provo, John and Sandra Siddoway of Bountiful, and Stanley and Linda Ottaway of St. Helens, Ore.

They are seeking financial compensation for medical expenses, lost wages and impaired earning capabilities; compensation for physical and emotional pain; punitive and exemplary damages; and court costs and attorney fees.

However, a spokesperson for the company spoke up for the drug and said that once all the facts are known, Avandia will be vindicated in court.

"We stand by Avandia and we are prepared to defend the medicine," said Mary Anne Rhyne, spokesperson for Glaxo Smith Kline. "We're confident that when courts and juries look at actual clinical data, the way in which we communicated with the FDA and physicians, and posting studies on our Web site, the facts will support our position."

Small Cap Network Issues Analysis of Pharmaceutical Stocks GILD, GSK, NVAX, SVA, BCRX

Pharmaceutical companies with potential solutions to the recent swine flu epidemic, like Gilead Sciences Inc., GlaxoSmithKline Plc, Novavax, Inc., Sinovac Biotech Ltd., and BioCryst Pharmaceuticals Inc. , are reviewed by SmallCapNetwork.com

The Small Cap Network a leading online investment community focused on small cap stocks, has issued an analysis of pharmaceutical companies Gilead Sciences Inc. (GILD), GlaxoSmithKline Plc (GSK), Novavax, Inc. (NVAX), Sinovac Biotech Ltd. (SVA), and BioCryst Pharmaceuticals Inc. (BCRX). The recent swine flu outbreak may ultimately be contained by a product of one of these drug manufacturers.

The swine flu outbreak, if it turns into a pandemic, could have a very limited number of treatments. Each of these companies currently offers a flu or anti-viral treatment that could help treat victims if infected. The article's author briefly looks at each manufacturer's best option for treating further swine flu infections.  

The Small Cap Network is one of the web's leading small cap stock trading communities. Though large caps tend to receive the majority of media attention, small and micro cap stocks as well as penny stocks can often offer the most potential for investment gains. The Small Cap Network web site and free newsletter offer in-depth fundamental research and technical trading recommendations on select companies within the global equity markets, including small cap stocks, micro cap stocks, bulletin board stocks, and actively traded penny stocks. 

Forward-Looking Statement: This press release may include or imply "forward-looking statements" within the meaning of the federal securities laws, commonly identified by such terms as "believes," "looking ahead," "anticipates," "estimates" and other terms with similar meaning. Although the Company believes that the assumptions upon which its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be correct. Important factors that could cause actual results to differ materially from the Company's projections and expectations are disclosed in the Company's filings with the Securities and Exchange Commission. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions.

SmallCapNetwork.com is not a registered investment advisers or broker/dealer. SmallCapNetwork.com makes no recommendation that the purchase of securities of companies profiled in this website is suitable or advisable for any person or that an investment such securities will be profitable. In general, given the nature of the companies profiled and the lack of an active trading market for many of their securities, investing in such securities is highly speculative and carries a high degree of risk. 

U.S. consumer group, drug companies want Medicaid expanded

WASHINGTON - A leading consumer group and a trade association representing major drug companies said on Tuesday they would spend millions to promote three changes to the U.S. healthcare system, including expanding government insurance for the poor.

Families USA and the Pharmaceutical Research and Manufacturers of America (PhRMA) said they would launch a multimillion-dollar advertising and lobbying campaign to get lawmakers to expand Medicaid insurance to more people, provide subsidies for moderate income individuals and families to buy insurance and cap out-of-pocket expenses for low- and middle-income people with insurance.

Ron Pollack, executive director of Families USA, said at a news conference with PhRMA chief Billy Tauzin that the groups, often on opposite sides of issues, had found areas of agreement that were "designed to make sure nobody's left out of the system."

Families USA has attacked drugmakers' prices and advocated importation of cheaper medicines and other policies opposed by PhRMA, which represents Pfizer Inc, GlaxoSmithKline PLC and Merck & Co Inc and other companies.

Despite lingering differences on some major issues, Tauzin said there was "a lot of common ground."

Soaring health care costs, rising unemployment and millions of uninsured Americans are putting pressure on lawmakers to reform the health care system in the United States.

PhRMA and Families USA did not address a major question facing lawmakers about whether a government-run plan would be part of the mix of insurance options that will be available to Americans.

Democrats want a public plan, but insurers and Republicans argue that private companies would be unable to compete with a potentially cheaper government-run option.

Senate Democrats who are drafting health insurance legislation are aiming to have bills ready for consideration by early June.

Drugmakers could expand their markets if more people had health insurance, but they could also face government efforts to lower drug prices.

Tauzin said pharmaceutical companies were concerned about a call for lower drug prices in Medicaid, which he called "an extremely regulated area of healthcare" that needed changes.

Par Pharma settles patent dispute with Reliant

Generic drug developer Par Pharmaceutical Cos. said Tuesday it settled a patent dispute with Reliant Pharmaceuticals Inc. over the abnormal heart rhythm treatment Rythmol SR.Par had challenged Reliant's patent. Under the settlement, Par can start selling a generic version of the drug on Jan. 1, 2011, or earlier, depending on the circumstances. Financial details were not disclosed.Reliant currently operates as a unit of British drug developer GlaxoSmithKline ( GSK - news - people ) PLC. Glaxo bought Reliant for $1.65 billion in 2007.Rythmol SR had sales of about $119 million for the 12 months ended September 2008, Par said, citing IMS Health ( RX - news - people ) data.Shares of Par Pharmaceutical rose 49 cents, or 4.5 percent, to $11.47 in afternoon trading. The stock has traded between $7.80 and $19.10 over the last 52 weeks.

China drug scams challenge pharmaceutical firms

BEIJING/HONG KONG - When Pang Jianli walked into a Beijing pharmacy to buy medicine for his flu-stricken son, he was greeted by an overwhelming display of boxes and bottles emblazoned with promises of miraculous cures.

"Unlike shopping in supermarkets, where I buy the brands I know and I know the brands I buy, buying drugs is different; the brands you know may not be what they claim to be," said the 38-year-old father.

China's poorly regulated medical market has spawned a new 'Wild West' for untested drugs offered by fly-by-night firms. The medical 'free-for-all' is reminiscent of the era of 'snake-oil salesmen' over a century ago in the United States.

From impotency treatments, to drugs that prevent hair loss, to medicines that cure chronic diseases, Chinese consumers are bombarded by adverts for a vast array of treatments making false or inflated promises.

Analysts say the murky business practices and misleading claims may actually help the prospects of foreign drug companies scrambling for a piece of the $110 billion medications market in China.

"Nowadays, Chinese people don't trust Chinese medications. They trust Western brands more as they have a better reputation," said Huang Jianshi, Assistant President of the Chinese Academy of Medical Sciences and Peking Union Medical College.

Foreign drug companies such as GlaxoSmithKline Plc and Pfizer Inc usually work directly with hospitals and doctors and rarely advertise, explained Du Jinsong, a pharmaceutical analyst with Credit Suisse in Hong Kong.

"Fake drug adverts have limited impact on foreign brands as foreign companies sell and market their products in a different way," he said.

Treatments being aggressively touted don't just promise to cure baldness or erase wrinkles, some also claim to cure chronic conditions such as hepatitis B, a disease that sometimes results in the need for a liver transplant, said Ewan So, president of the Society of Hospital Pharmacists of Hong Kong.

"If there was such a magic drug, we would have used it by now," he said. "A liver transplant costs between HK$500,000 to HK$600,000. Why go to all that trouble?"

China's State Food and Drug Administration (SFDA) counted 329,613 cases of the distribution of unlicensed drugs and medical products in 2007 and collected 746.17 million yuan (or $109 million) in fines.

But the fines have done little to deter the sale of untested drugs in a country where regulation is lacking and enforcement is lax. Analysts said it was hard to measure to what degree public mistrust of adverts have affected drug sales, which grew 26 percent to 752 billion yuan ($110 billion) last year in China.

"Like any other social issues in China, we now have adequate policy out there. The most crucial thing is how to effectively enforce the law," said Xu Jun, a pharmaceutical analyst at Orient Securities in Shanghai.