Sunday, May 11, 2008

Takeda's bid to become a world class oncology player

Takeda recently offered to pay $8.8 billion for Millennium, the Cambridge based Biotech company that manufactures Velcade. The $25/share offer, a hefty premium to Millennium's recent share price, reflects the ongoing demand for new products by pharma and Takeda's drive to be a world-class oncology player. If the deal terms remain the same, Millennium will become the 8th largest market value in the biotechnology industry, roughly twice as much as the next ones in line for takeovers; Cephalon, ImClone, and Vertex.

Takeda is clearly aggressive about becoming a player in the global oncology market. Previously, it had a $640 million two-part, 13-compound deal with Amgen and its even more recent $320 million worldwide deal for Cell Genesys’ GVAX prostate cancer immunotherapy. The tremendous advantage of the dollar’s low value relative to the yen is a major factor why Takeda could afford to pay the 65% premium to Millennium’s closing price, even without a share of the valuable ex-US Velcade rights owned by J&J.

What is Takeda getting for its money? In addition to Velcade, Millennium has 10 drugs currently in clinical trials, primarily focused around oncology and inflammatory bowel disease. The company’s next most advanced product, MLN-0002, an antibody against the gut-specific alpha-4 beta-7 integrin for ulcerative colitis and Crohn’s disease, has yet to enter Phase III clinical trials and isn’t likely to be approved before 2011 or 2012 so the pipeline is very much a long term project, something the Japanese are renowned for.

It also means it gets to rebuild a pipeline. By acquiring Millennium, Takeda will help address a short term revenue problem. The patents on two of Takeda's biggest-selling products, ulcer drug Prevacid and diabetes treatment Actos, expire in 2009 and 2011, respectively. Revenue from Millennium's sole marketed product is growing quickly and is widely expected to reach as much as $345 million this year.

In addition, sales of Velcade could get another big boost this summer when the FDA rules on an application from Millennium to sell the drug as a first-line treatment for multiple myeloma. Currently, the drug's labeling indicates it should be used only as second-line treatment. A label allowing for broader usage of the drug would likely result in more patients using Velcade for longer periods of time and generate more revenues.

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