EP Vantage interview – Clinigen looks to repeat the Foscavir trick

When Peter George, chief executive of the recently floated UK niche medicines business Clinigen, said he was in product acquisition talks with five parties and hinted that deals were imminent, he was not joking.

Within six months two drugs – Theravance’s Vibativ and Novartis’s Cardioxane – have been added to Clinigen’s speciality pharmaceuticals division, which had previously comprised only Foscavir. “Our ability to do acquisitions was the elephant in the room, but we had to demonstrate it,” Mr George told EP Vantage in an interview today. The trick now will be to turn the long-neglected Cardioxane into a success story like Foscavir.

Clinigen had bought Foscavir, a cytomegalovirus drug 12 years off patent, from AstraZeneca in 2010. Since then, sales have more than quadrupled. The drug is used as a salvage medicine for hospital-acquired pneumonia with a viral cause.

Mr George says that in “building on Foscavir we were looking for hospital-only products that ideally were a ‘must have’” – hence the logic of buying Cardioxane, an oncology support drug that minimises the cardiotoxicity of anthracycline chemotherapy and apparently has no licensed competition. Vibativ, meanwhile, treats hospital-acquired pneumonia of bacterial origin, also in the salvage or third-line setting – neatly mirroring Foscavir.

But the two deals are quite different. While Cardioxane is an off-patent drug that has simply been divested by Novartis – in the same way that AstraZeneca had offloaded Foscavir – Vibativ represents a new departure for Clinigen, being a novel product with over 10 years’ patent life, acquired through a 15-year ex-US licensing deal with a $5m signing fee and a 20-30% sales royalty.

For Cardioxane Clinigen is paying $33m in two undisclosed tranches, the second of which it is assumed will be triggered by the final transfer of rights from Novartis next year. The UK group finished its fiscal six months ended December with £22m ($34m) in the bank, and given its cash generation and a £10m bank facility is confident of financing the deal with available funds, says Mr George.

Neglected products

Like Foscavir, Cardioxane was a neglected product that had ceased to be important to its big pharma originator. Its annual sales are $11-12m, though Clinigen will aim to boost this significantly through new pricing and marketing strategies – just like with Foscavir, says Mr George.

Another key consideration was Cardioxane’s presence in Latin America – a key market for Clinigen – and its established distribution network there, which Mr George wants to use for products like Foscavir.

Was there much competition from other bidders? “Clinigen didn’t start at the front of the queue,” admits the chief executive, but this is where it finished, thanks to giving Novartis an easy “single disposal”. Others had apparently pitched more convoluted regional transactions.

While Foscavir provided the blueprint for Cardioxane, Vibativ had a more roundabout journey. When its original EU supplier, Boehringer Ingelheim, lost its marketing authorisation last year after hitting manufacturing problems Mr George had considered adding the drug to Clinigen’s global access programme division, which supplies unapproved drugs on a named-patient basis.

But when Theravance’s licensee Astellas then scrapped a co-promotion alliance, an ex-US licensing deal became the obvious solution – especially since Theravance was focused on setting up a US commercial presence with GlaxoSmithKline. What the Theravance deal showed was that while Clinigen’s three divisions might seem disparate there exist clear overlaps for business development.

Indeed, translating global access programmes into outright acquisitions had been one of the strategies touted when Clinigen floated (EP Vantage Interview – Clinigen pays the price but braves IPO waters, September 24, 2012). Overall Mr George says the IPO has met expectations, and with his company’s stock up 41% few can blame him.

Yet despite the money already splashed out on M&A, Mr George sees more takeovers in store for the speciality pharmaceuticals division. “On the back burner we are still evaluating some [opportunities] from the time of the IPO,” says the chief executive. “We might have another four within three to five years.”

“We’ve managed to tick all the boxes,” he enthuses, “but we never sit back.” Deal bankers will be relieved to hear that.

Clinigen's fiscal first-half highlights, Dec 31, 2012
Division Sales Gross profit
Clinical trial supply £45.1m £5.8m
Speciality pharmaceuticals £13.1m £10.1m
Global access programmes £2.8m £1.1m

To contact the writer of this story email Jacob Plieth in London at[email protected] or follow@JacobEPVantageon Twitter

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