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IMMUNOGEN SEEKING CORPORATE PARTNER FOR ONCOLYSIN-B CANCER THERAPY, EXEC TELLS LABOR CMTE.; FOREIGN CAPITAL IS MOST LIKELY SOURCE, SAYARE AND PMA WARN

Executive Summary

ImmunoGen is searching for a corporate partner to continue the development and marketing of its investigational non-Hodgkins lymphoma therapy Oncolysin-B, Chairman and CEO Mitchel Sayare indicated at a Nov. 18 hearing before the Senate Labor & Human Resources Committee on the effect of the Clinton health care reform plan on the pharmaceutical and biotechnology industries. Attempting to demonstrate the effect of weak public markets on mid-stage biotech companies, Sayare told the committee that ImmunoGen has had "no choice but to turn away from the investment community -- since they are not there for us -- and to look at the big pharmaceutical companies or other sources" to continue development of its monoclonal antibody cancer therapeutics. A corporate partner/investor is "the only way that we have to survive" in the face of the loss of investor interest in the biotech sector that has resulted from concerns about the treatment of breakthrough drug pricing under health care reform, Sayare maintained. ImmunoGen has a "banker out on the street looking for opportunities...with pharmaceutical companies," Sayare reported. Noting that lmmunogen has raised a total of $110 mil. since its formation, Sayere contended that "we need at least that much more to got our first product into the marketplace." The company's cash reserves were $34 mil. at the end of Its fiscal year June 30, down from $57 mil. a year ago. ImmunoGen's most likely source of capital from other companies comes from outside the U.S., Sayare told the Senate committee. "Interestingly enough, because we have built up the infrastructure that we have with our investors" money, the primary interest in our products comes from off-shore companies." He pointed out that the infrastructure is not as valuable for domestic companies. "Foreign companies do not have that infrastructure, so they see that as an opportunity," Sayare maintained. The ImmunoGen exec said that he was filling in as a witness at the hearing for Shaman Pharmaceuticals President and CEO Lisa Conte, who "is in Japan right now," Sayare reported. "Actually she is scouring the world looking for capital to fund her operation." Pharmaceutical Manufacturers Association President Gerald Mossinghoff observed that the biotech industry "has been targeted by MITI, the Japanese Ministry of Industry and Trade. They have said they will have the lead by the turn of the century." Mossinghoff maintained that Japanese companies are making a "very active effort" to provide needed capital to U.S. biotechnology. Exploring the political agenda of the biotechnology industry as separate from that of pharmaceutical companies, committee member Sen. Dodd (D-Conn.) asked witnesses to explain the difference between the two sectors. "Is there a danger here of us lumping everyone together?" Dodd inquired. Glaxo, Inc. Chairman and CEO Charles Sanders and Warner- Lambert President and Chief Operating Officer Lodewijk de Vink both pointed to the important role that biotechnology has come to play in drug discovery activities of research-based pharmaceutical companies. "It is something without which we could not do in the 1990s in terms of carrying on research," Sanders testified. De Vink explained that Warner-Lambert considers biotechnology to be "enabling technology to help us in the drug discovery area." About "half of our research discoveries are...through biotechnology science," de Vink estimated, "so it's an integral part of our discovery program." Sanders described the biotech industry as "an individual small startup company which depends upon venture capital to pursue particular research enterprises." ImmunoGen's Sayare agreed with the difference between the biotech industry and biotechnology enunciated by Sanders and de Vink, noting that biotech is "an industry that primarily depends on investors to cover our operating expenses, and so in that way we distinguish ourselves." Pressed by Dodd to highlight the issues in health care reform that the biotech industry is "particularly concerned about" and that have "greater significance" for biotech than for the pharmaceutical industry, Sayare maintained that biotech "is fragile." The biotech industry is fragile "in the sense that the capriciousness of the investment community directly affects our future," Sayare explained. "It's very difficult for us to sit down and create a five-year strategic plan," he said, "because we don't know if we're going to be around in five years, because we depend so much on the investment community." The uncertainty created by the Clinton health care reform proposal about a company's ability to set the price "it needs... to offer a return to its investors" is less damaging to the drug industry, Sayare suggested, because "they don't depend on those investors to fund their operations." Drug firms "depend on their cash flows to fund their operations," Sayare maintained, and "those cash flows come from sales. We don't have any sales." De Vink contested Sayare's characterization of the biotech industry's essence, objecting: "I hardly believe you can run or continue to run a company on investments which are never going to give any return." Neither, de Vink, contended, can Warner-Lambert "think that our investors are not interested in what's happening to our shares." Investors in pharmaceutical companies are "tremendously concerned" about the devaluation in company stocks, de Vink pointed out. Warner-Lambert is "spending research the same way, we need to have returns, and our investors, our shareholders, want to have that," he insisted. "So I don't think there's that dramatic difference at all."
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