ViroPharma takes gamble with Lev acquisition

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ViroPharma has taken a big gamble with its $443m acquisition of Lev Pharmaceuticals, which has been made primarily to get its hands on Cinryze, a protein replacement therapy for the rare inflammatory disorder hereditary angioedema (HAE).

Several companies have been racing to be first to launch an approved product for the condition in both the US and Europe, despite the fact that only 10,000 people have been diagnosed with HAE across both regions. ViroPharma has backed Cinryze because it is the only candidate up for approval in a prophylactic setting. However, demand for a preventative treatment is very hard to gauge, and fears that it will be much smaller than ViroPharma hopes, sent shares in the company down 15% when it announced the acquisition.

HAE is characterised by periods of sudden inflammation in the face, throat or extremities, and in rare cases can cause death. There is a definite need for treatments; only in certain European countries are unregistered versions of Cinryze available, made by Lev’s partner Sanquin and rival CSL Behring, with its almost identical product Berinert.

Netherlands-based Pharming has developed a transgenically engineered protein, which has been turned down in Europe and made little progress in the US, while Jerini and Dyax have pursued small molecule approaches that interrupt the inflammatory cascade, both of which have been turned down in the US. Jerini's Firazyr, bought by Shire earlier this month, won European approval yesterday.

But all have been pursued in an acute setting, used after an attack has started.

Orphan exclusivity

CSL’s Berinert has a PDUFA date of September 5, in an acute setting, while prophylactic Cinryze is due to hear on October 14; an advisory committee voted in favour of approval earlier this year.

Both products have orphan designation, and real concerns exist over whether the approval of one would block the other from the market, under orphan drug rules. ViroPharma said yesterday that it believes both will be allowed to launch because of their different methods of use (acute versus prophylactic), but some commentators will still harbour doubts until the FDA makes a definitive ruling.

Market potential

On top of that concern, the questionable market potential has prompted accusations of ViroPharma overpaying, particularly considering the transaction value will rise to $618m if certain regulatory and sales milestones are achieved.

ViroPharma forecast peak sales of $250-$300m for the drug, achievement of which will rely on a big portion of the 4,600 diagnosed US sufferers choosing to have two infusions each week, carried out at an infusion centre, lasting at least 10 minutes.

Anabolic steroids are used to control symptoms in the US, but for women and children, this is a very unattractive option, and only 1,500 people in the US take them regularly for HAE. For some of those patients, and the women and children who suffer several attacks a month, prophylactic Cinryze will be a real option.

For those with fewer attacks, an acute treatment might be more attractive. If and when the small molecule drugs from Dyax and Jerini, which are subcutaneously administrated potentially by the patients themselves, reach the market bi-weekly infusions may seem even more inconvenient.

Similar accusations

When Shire bought Jerini earlier this month, it faced similar accusations of overpaying for a product with a hard to define value. ViroPharma has picked a product that is even harder to value, with so many variables that will affect its uptake in the future.

Admittedly, the way the deal has been structured means if the upcoming regulatory reviews go very badly, ViroPharma can back out of the deal with minimal financial exposure. And if the competitors get delayed, which has happened several times before for all the HAE candidates, it would be a bonus.

ViroPharma needs another product to add to its stable, with only the antibiotic Vancocin on the market, and one anti-viral in phase III trials. Despite the ever-present generic threat to Vancocin, which lost patent protection years ago, the group’s substantial $600m cash pile has kept interest in the stock alive.

Whether Cinryze is a good use of that cash remains to be seen, and is a question unlikely to answered soon, considering the value of the product is almost impossible to define until sales are well underway. Thus investors were right to be wary yesterday.

ViroPharma has another key event on the horizon. On July 23, an FDA advisory committee will discuss methods of determining the bioequivalence of locally acting gastrointestinal drugs, which has ramifications for the potential approval of generic versions of Vancocin.

Bad news on that front, following this incredibly hard to value acquisition, will make investors very nervous about Viropharma in the coming years.

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