Drug giants still hunger for biotech Additional mergers and other deals expected this year

A Md. firm's big friend

Money in search of profitable ideas

January 02, 1996|By Mark Guidera | Mark Guidera,SUN STAFF

Looking for some signposts for what might unfold in the year ahead for the biotechnology industry? The best signals are probably behind us, say industry experts.

Specifically, they say, the last three or four months say a lot about what's probably around the bend in 1996.

That period was flush with mergers, acquisition, alliances and licensing deals between some of the world's largest pharmaceutical companies and some of the nation's struggling biotechnology boutiques. All of that business activity is a clear sign, say industry analysts, that the big drug companies now are convinced that there is strong future profit potential in a young, high-risk industry focused on innovation.

A case that highlights what may be ahead in 1996 can be found right here in Maryland, analysts say.

Bristol-Myers Squibb Co., one of the world's largest and best-known pharmaceutical firms, announced two weeks ago that it will make a research and equity investment in EntreMed, a small Rockville firm virtually unknown to the general public and even industry analysts.

Bristol-Myers' interest in the company? A pioneering arena of medical research, called angiogenesis, targeting cancer treatments that could yield $50 million annually.

Says Eddie Hedaya, a biotechnology industry analyst with Long Island-based BioVest: "The big pharmaceutical companies are becoming very aggressive in their search for biotech companies engaged in cutting-edge research that has promise."

For example, giant Pfizer Inc. alone spent more than $115 million in 1995 on biotechnology deals.

"The biotech companies have the innovations and the research; the drug companies have the money and the foresight," says Mr. Hedaya.

As a result, predict some industry experts, 1996 easily could rival 1995's frenzied pace of biotech deal-making that saw an estimated 200 mergers, acquisitions and alliances.

Kenneth B. Lee, a San Diego-based life-sciences expert at Ernst & Young, the national accounting and consulting firm sees the deals driven by another trend that will grow in 1996: The need among many small and medium-size companies for money with which to sustain research as they burn up cash reserves and blanch at the high cost of seeking Food and Drug Administration approvals for products.

Meanwhile, a sea change under way at the FDA, the regulatory body for the biotech industry in the United States, is another bellwether of fair skies ahead.

This holds most true for companies developing medicines for cancer, AIDS and other life-threatening illnesses. Companies engaged in diagnostic and other medical technologies may face difficult going at the FDA, as Oncor Inc., a Rockville biotechnology firm found out when its gene-based test to predict the recurrence of breast cancer was shot down in late November.

Industry analysts say Oncor's disappointment may be a signal that the FDA plans to stay with a conservative approach in 1996 toward gene-based and other cutting-edge research.

Still, during the past several months the FDA has significantly streamlined the process by which some biotechnology therapies are reviewed for approval. And there is a movement in Congress to further loosen FDA's traditionally tight reign on biotechnology. As a result, the FDA has recently made such speedy work of approving some biotech drugs that even the most optimistic analysts marveled at the dramatic shift.

Two significant examples, say analysts, most likely herald what's ahead for biotech approval reviews coming up in 1996:

The Dec. 15 FDA advisory panel recommendation that RespiGam, a vaccine for prevention of a respiratory virus that afflicts infants, be approved. The drug, which could yield $50 million annually in sales, was developed by Maryland-based MedImmune Inc.

Even more significant, say experts, was the Dec. 3 FDA advisory panel recommendation that Biogen Inc.'s Avonex, a treatment to slow the progression of multiple sclerosis, be approved.

"The year ahead is looking very good for biotech," said William Washecka, a Fairfax, Va.-based biotech industry expert with Ernst & Young.

What will be at the forefront of biotechnology industry experts' watch list in 1996?

* Several "blockbuster" drug approvals from the FDA. The regulator is expected to move aggressively, in particular, on new therapies for the treatment of AIDS, MS, and other debilitating diseases.

A key FDA hearing many in the industry will be watching closely early next year involves Teva Pharmaceutical's Copaxone, another treatment for MS. The FDA panel meeting to discuss approval of Copaxone for marketing in the United States is seen as a potentially defining vote for biotech's future. An approval would indicate that the FDA is open to biotech therapies that target mechanisms of the body on the protein level that contribute to illness.

* The race to map the human genome as research intensifies.

Perhaps no area of biotechnology holds more import for the future of medicine. There is huge profit potential in selling information from the Human Genome data base, and designing treatments for cancer and other illnesses. Even with all this promising activity, biotechnology investors shouldn't necessarily expect gains in 1996, say analysts. Zacks Research Investment projects in 1996 that the biotechnology industry will exceed 1995's average of 70 percent earnings per share growth. But risk will still be inherent, note experts.

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