GSK Acquisition Of Corixa Means End To Royalty Payments
This article was originally published in The Pink Sheet Daily
Executive Summary
GSK agrees to pay $300 mil. for Corixa in an M&A play to pick up the biotech's adjuvant technology. The deal will allow GSK to avoid paying adjuvant therapy royalty payments. Corixa's technology is used in GSK's high-profile Cervarix HPV vaccine.
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GlaxoSmithKline's acquisition of Corixa means GSK will no longer have to pay royalties to the biotech company for its adjuvant technology. "GSK will no longer incur royalties and other costs under the existing agreements in place between GSK and Corixa nor will GSK incur royalties on future sales of their vaccines containing" Monophosphoryl Lipid A (MPL), GSK announced April 29. The MPL adjuvant is important for a number of GSK's pipeline vaccines, and the acquisition price may have been viewed as attractive relative to the present value of those payments. The M&A play may also have reflected the company's particular enthusiasm for the HPV vaccine Cervarix . GSK is expecting a 2006 European filing for Cervarix, but has not disclosed its timetable for U.S. submission (1 (Also see "GSK Plans Cervarix NDA Filing Two Years Ahead Of Schedule" - Pink Sheet, 28 Oct, 2004.)). GSK is behind Merck, who expects to file an NDA for its HPV vaccine Gardasil in the second half of 2005. However, during GSK's April 28 first quarter earnings call, CEO J.P. Garnier downplayed the "first-mover advantage." If the approvals come "fast and furious" in the international markets, "there is no first-mover advantage that is really significant, particularly if you have a lot of catching up from women who want to get the vaccination," he said. "We have to embrace the fact that our vaccine will be in demand through the world, not just Europe." GSK and Corixa also had a pre-established relationship relating to the copromotion of Bexxar (tositumomab). However, Corixa divested development, manufacturing and marketing rights for Bexxar to GSK at the end of 2004 (2 (Also see "Corixa Sells Bexxar Rights To GSK As Part Of Restructuring" - Pink Sheet, 13 Dec, 2004.)). The late Friday announcement of the deal came just ahead of the April 30 start of the International Papillomavirus Conference and Clinical Workshop in Vancouver, where GSK will be presenting Cervarix market research. GSK will pay $4.40 per share (about $300 mil.) in an all cash deal. The acquisition price represents about a 48% premium to the April 28 closing market price. The transaction is expected to close in the third quarter. - Lee Kalowski |