Biotechnology companies that are on the acquisition block could be getting suitors from a new corner of the world: India.
That’s because of changes in how the country’s drug industry approaches patent rights, said Ned Olivier, founding general partner of Oxford Bioscience Partners, a venture capital firm with an office in Costa Mesa.
“Until early 2005, India did not respect product patents,” Olivier said. “So they did not need discovery research and they became very strong in chemistry, manufacturing and clinical trials.”
That’s changed, he said.
“They now respect product patents, and so the Indian pharmaceutical companies that do not have a large R & D; operation for drug discovery are interested in buying drug discovery companies with product leads from Europe and the U.S.,” Olivier said.
The trend’s taken root in the past few years, he said.
“It happens to coincide with a lot of smaller biotech companies,not ready for IPO or acquisition,having trouble raising money,” Olivier said.
Some of those same companies are having trouble getting additional financing, he said.
Another trend that could influence device and drug deals: regulatory changes by the Securities and Exchange Commission that could make it harder for smaller companies to raise money, according to Dennis McCarthy, a managing director at B. Riley & Co., an investment banking firm with offices in Newport Beach and Los Angeles.
The SEC has grown leery of private investment in public equity, or PIPE, deals, McCarthy said.
The deals, which attract hedge funds and other investors, have been a popular way for smaller public companies to raise money without doing a big secondary stock sale.
But regulators are seeking to limit them because of fears that such deals are getting complicated and shareholders aren’t aware of what they might be getting into.
The regulatory changes will force “serial PIPE issuers,” many of which are medical technology companies, to look at buyouts as an alternative, McCarthy said.
AMO’s Ups and Downs
Advanced Medical Optics Inc. has seen highlights and lowlights this month.
The Santa Ana-based eye device and contact lens maker last week said it was going to pay $808 million for Irvine eye laser maker IntraLase Corp. in a bid to boost its business in laser eye surgery.
That was the highlight.
Earlier in the month, Advanced Medical saw its shares hit a low after it said it might have to delay the launch of a surgical lens because of regulatory concerns.
The Food and Drug Administration said Advanced Medical needs to expand its clinical trial of its Tecnis Multifocal intraocular replacement lens by getting more people to participate. Advanced Medical said the request may push back the launch of Tecnis by a year to 18 months.
Delaying Tecnis puts Advanced Medical at a “strategic disadvantage as other rivals improve footing in the time-sensitive emerging U.S. multifocal (lens) marketplace,” said Lawrence Keusch, a Goldman Sachs & Co. analyst, in a report.
Advanced Medical’s shares fell 4% on the news and are off 20% since September.
Meanwhile, Alcon Inc., a Nestl & #233; SA eye care and device unit that has more than 500 workers in Irvine, saw its shares rise almost 4% after analysts said it would gain from Advanced Medical’s lens delay.
“This clearly benefits Alcon, which we prefer for its leading, diversified portfolio,” said Andrew Swanson, a Citigroup analyst, in a research note.
Another analyst, Wachovia’s Peter Bye, said in a research note that Advanced Medical’s recent recall of a contact lens solution also benefits Alcon.
Advanced Medical recalled nearly 3 million units of its Complete MoisturePlus multipurpose contact lens solution and Active Packs because of contamination at its Chinese plant.
The majority of recalled lens solutions were distributed overseas. Only about 183,000 of the units made it into the U.S.
Regulators OK Spectrum Trial
Spectrum Pharmaceuticals Inc., an Irvine drug maker, received Food and Drug Administration approval to do a mid-stage clinical trial of ozarelix, its possible treatment for enlarged prostate.
The trial’s expected to involve 100 men who’ll receive ozarelix or a placebo every two weeks, Spectrum said. The men then would be tracked for six months.
Spectrum received a license from Aeterna Zentaris Inc. of Quebec City to develop and market ozarelix for North America and India in 2004.
Under the deal, Spectrum is set to get 50% of any upfront or milestone payments, royalties, as well as profits from Japanese product sales. Nippon Kayaku Co. has the Japanese rights for ozarelix’s potential cancer uses.
The move is part of an ongoing shift by Spectrum away from generic to brand-name drugs. Its lead branded drug is satraplatin, a prostate cancer drug.
Bits and Pieces:
Medicare, the health insurance program for elderly and disabled Americans, now covers I-Flow Corp.’s On-Q pain relief device under its hospital outpatient payment system, according to the Lake Forest-based company Four Orange County doctors,Ronald McGee and David Zachary of San Clemente and Richard Kempert and Larry Snyder of Laguna Niguel,have affiliated their practices with MDVIP Inc., a Boca Raton, Fla., company that is based on the premise that preventive healthcare, coupled with tailored wellness programs, reduces the length and cost of hospital stays, as well as the general health of patients.
