LONDON (Reuters) - GlaxoSmithKline has bought global rights to Danish biotech company Genmab's most promising new drug, a treatment for leukemia, in a record deal worth up to $2.1 billion, the two firms said on Tuesday.
The agreement is the biggest ever clinched by a biotech company, eclipsing a $2-billion alliance between ImClone Systems and Bristol-Myers Squibb that was revised down in 2002 when ImClone's drug Erbitux hit snags.
Genmab shares surged as much as 24 percent to a new all-time high of 424 Danish crowns in early trading, valuing the business -- which has yet to make a profit -- at close to $3 billion.
The deal is the latest in a string of product acquisitions by large pharmaceutical firms eager to tap biotech know-how to boost their drug pipelines, and the price paid reflects the fierce competition for late-stage assets.
It covers HuMax-CD20, an experimental human antibody in late-stage development for CD20 positive B-cell chronic lymphocytic leukemia and follicular non-Hodgkin's lymphoma.
The drug, which is also in Phase II trials for rheumatoid arthritis, is similar to MabThera/Rituxan from Roche Holding AG and Genentech.
Genmab's chief executive said she was confident HuMax-CD20, which is expected to be filed for regulatory approval by 2008, could generate well over $2 billion in annual sales.
"I think potential sales are higher than that and when you see the deal value, you can see that they (Glaxo) believe (that) also," Lisa Drakeman told Reuters in a telephone interview.
Some analysts have penciled in potential sales of as much as $5 billion in cancer and arthritis, she noted.
Jyske Bank analyst Frank Andersen, who forecasts peak sales of $2.8 billion, raised his rating on Genmab shares to "buy" from "accumulate" on the deal, saying that regulatory approval for HuMax-CD20 for its three uses would put a fair value of 470 crowns on the stock.
The Danish group had been expected to strike a deal for the product by the middle of 2007.
Under the agreement with Glaxo it will receive a license fee of 582 million Danish crowns ($102 million) and Glaxo will invest approximately $357 million to buy shares in Genmab.
Genmab is also entitled to milestone payments of up to $1.6 billion, based on the drug's successful development and commercialization and will receive tiered double-digit percentage royalties on global sales of the medicine.
GLAXO'S ANTIBODY DRIVE
The deal is the second struck by Glaxo in the fast-growing antibody arena in less than two weeks, following its agreement to buy early-stage drug firm Domantis for 230 million pounds ($449 million) on December 8.
Europe's biggest drugmaker has been under-represented in biological medicines, such as antibodies, in the past.
In addition to winning rights to a promising new drug that could join its growing cancer portfolio in the near future, the tie-up with Genmab also increases Glaxo's presence in next-generation antibody technology, since it will have an exclusive option to CD20 UniBody.
Unibody is a new antibody technology developed by Genmab offering a smaller format, which means it may work more effectively than existing monoclonal antibodies. This dovetails with Domantis's similar ultra-small antibody technology.
Genmab is to maintain a key role in the future of HuMax-CD20 in an arrangement that underlines the strong negotiating hand of successful biotech companies.
It will be responsible for development costs until 2008 and will have an option to co-promote HuMax-CD20 as a cancer treatment in the United States and the Nordic region.
Genmab will also have an option to co-promote Glaxo's drugs Bexxar and Arranon in the United States and Atriance in Nordic countries.