As strategies go, Alice Huxley’s decision to take an unwanted drug from Novartis and then sell it back to them nine years later for $880m looks like an excellent one. The plan has also netted the canny chief executive of Speedel just over $220m following the sale of her 21.5% stake in the company to the Swiss giant.
Even at a quick glance the deal looks to be a fair one taking into account the value of hypertension drug Tekturna to Speedel, which according to the EvaluatePharma NPV Analyzer currently sits at $733m.
Back in 1999 Novartis out licensed Tekturna to Speedel, with a call back option that it exercised in 2002. As part of today's deal the group has added an additional 51.7% stake to its existing 9.7% holding, buying shares at SFr130, valuing the entire company at $990m and allowing it to skip all future royalty payments. The remainder of the shares will be scooped up via a public tender offer.
Additionally, by putting its money where its mouth is should end the questions of whether Novartis was placing enough marketing muscle and support behind Tekturna, whose estimated sales of just $51m in the last quarter had disappointed analysts and prompted some to call the drug 'tekturkey'.
Today’s news indicates that Novartis believes in the potential of the drug. Analysts have pencilled in sales of $1.69bn by 2012 according to consensus forecasts from EvaluatePharma, and the product is predicted to be the biggest growth driver at the company over the next five years.
Novartis now intends speeding up development of Tekturna in combination with other drugs; it has already been combined with a diuretic and could be linked up with Diovan. Improving the efficacy of the drug should improve the sluggish prescription sales.
As will demonstrating that the drug has beneficial effects on cardiovascular events and end-organ protection not seen with other hypertension drugs. To do this the group has initiated the ASPIRE HIGHER programme, of 14 clinical trials, featuring over 35,000 patients.
If successful, the ASPIRE HIGHER programme could significantly differentiate Tekturna from the competition and more importantly protect the entire Diovan blood pressure franchise, which faces substitution with generic versions of Merck & Co's Cozaar in 2010 and direct generic competition from 2012. Diovan, which is Novartis’ most important drug, last year had sales of $5bn.
But the deal is not just about Tekturna. Speedel has a rich pipeline of five other drugs, which includes three follow on renin inhibitors, which are expected to work even better than Tekturna. While the drugs are still too early stage to attract forecasts, with the exception of phase II product SPP635 which has peak sales estimates of $2bn, the development of the products should accelerate rapidly with the might of Novartis behind it.
But it is not just Novartis that has gained in the deal. For Speedel, the intervention of its big pharma partner not only ends a relationship that at time looked fractious, but also saves its shares from the prospect of continuing to languish over the next 18 months, in anticipation of the first read out from the Aspire trials in 2010.
Speedel will also be spared the difficult prospect of trying to raise money in very difficult markets to fund development of the rest of its pipeline, avoiding further pressure on the shares, which had fallen by 50% in the last 12 months.
It is thought it was this prospect of fundraising that changed the mind of Ms Huxley, who had until very recently trumpeted that she would be keeping her company independent. By changing her mind she has not only guaranteed herself a very comfortable retirement, if she chooses, but also secured the future of the company, that like many smaller biotechs would have struggled to secure extra cash.