Magazine article Global Finance

Genomics Map Pharmaceutical Financing

Magazine article Global Finance

Genomics Map Pharmaceutical Financing

Article excerpt

Biotechnology, and especially genomics, are leading US and Euroean health care financings.

Biotechnology deals, and especially genomic deals, are driving the vast majority of financings in the health care market, and the promise of the highly-targeted pharmaceuticals these technologies are producing suggest the wave is far from over.

As biotechnology and genomics scored breakthroughs, the companies active in the field captured the imagination of investors and Wall Street financiers during 2000 - although since November they are well off their highs. As much as 75% of the number of deals and 84% of dollar volume were in biotechnology and specialty pharmaceutical companies, according to Peter Reikes, head of global health care finance at SG Cowen.

The demand for biotechnological expertise - if not genomic capability - also is driving the consolidation of the pharmaceutical industry, matching unusual bed partners in the quest for the next decade's block-busters.

In June, for example, Millennium Pharmaceuticals announced a five-year, billion-- dollar strategic alliance with German pharmaceutical giant Aventis that turned heads in the biotechnology industry and on Wall Street.

The two drug manufacturers will swap technology and strive jointly toward finding therapeutic agents to combat a passel of diseases, including multiple sclerosis, asthma, chronic bronchitis, and infections of the alimentary canal and digestive system. What makes the deal so striking between the odd couple - one an upstart biotechnology company based in Cambridge, Massachusetts, which has existed only since 1993, and the other a global pharmaceutical company re-christened Aventis in the 1998 merger of Hoechst of Germany and RhonePoulenc of France - is that Millennium is fully participating in the entire process of discovery, development, and marketing of drugs.

The arrangement, in which Aventis is taking a $250 million equity stake in Millennium, caps a series of adroit moves for the Cambridge company. These include collaborations with such titans of the pharmaceutical industry as Astra, now part of AstraZeneca, and Pfizer and, most importantly, a research pact with Bayer that puts $465 million into Millennium's coffer over five years. The Bayer deal not only helped finance Millennium's discovery of as many as 225 gene targets in the human body but allowed the company to hold on to the rights to 200 of them. Moreover, with its $635 million acquisition in 1999 of its Cambridge neighbor, LukoSite, Millennium has transformed itself from a research organization into a drug discovery company with promising therapies in clinical trials.

With the Aventis deal, analysts think that Millennium, which in October completed a follow-on equity financing of $798 million led by Morgan Stanley Dean Witter, is adroitly poised to catapult itself into the front ranks of world-class pharmaceutical companies. "No one has ever gone from a company with market cap of $400 million to one of this size in so short a time," says an impressed Gill Sawhney, a partner and health care investment banker at Thomas Weisel Partners.

Genomics is the science of gene discovery and the characterization of gene location, structure, regulation, and function. Although no genomics company has yet to run the gauntlet of the Food and Drug Administration and introduce a drug to market, there are high hopes, now that scientists have mapped 99% of the human genome, the entire genetic "blueprint" of a human being. In the wake of the combined effort of Celera Genomics Group and the government-- sponsored Human Genome Project, the human genome's three billion base pairs of nucleotides, the molecules that form DNA, have been located along with some 100,000 genes. With breakthroughs in understanding the molecular basis for diseases, there is genuine hope that such pernicious maladies as cancer, Alzheimer's disease, AIDS, hepatitis B, and congestive heart failure can be understood and treated with greater confidence for success. …

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