Monday, November 26, 2007

Pfizer's Coley buy timely for receptor drug developers

By Ryan McBride

Drug giant Pfizer Inc. bought Wellesley-based Coley Pharmaceutical Group Inc. last week, several months after New York-based Pfizer's own actions sent Coley's stock south.

In spite of Pfizer's hand in the decline in Coley's stock value, industry watchers are applauding Coley executives for agreeing to sell the firm to Pfizer for $164 million. One analyst also characterized the deal as a victory for drug companies -- including Cambridge-based Idera Pharmaceuticals Inc. -- that, like Coley, develop drugs that use Toll-like receptors to spur the immune system into action. Toll-like receptors are a type of protein critically involved in the innate immune response to bacterial, viral and fungal pathogens.

Pfizer agreed to buy Coley last week for $8 per share, below its value in June when Pfizer halted some clinical trials of a lung cancer drug it had licensed from Coley. Pfizer kept some Coley-licensed drugs in development, but Coley's share price fell to all-time lows.

"This is a good thing because it seems to validate the technology," said Derek Jellinek, a biotechnology equity analyst for Susquehanna Investment Group LLP in Bala Cynwyd, Pa.

The Pfizer deal will mean a 50-percent loss for those who purchased Coley stock at $16 per share in Coley's 2005 IPO. Yet due to the high-risk nature of biotech investing, Jellinek said, a shareholder complaint is unlikely.

Coley executives said the sale to Pfizer is expected to close in early 2008.

Pfizer's acquisition boosts such firms as Idera that develop drugs to target Toll-like receptors, said Jellinek. Idera, which is in Phase 2 clinical trials of a drug to treat kidney cancer, saw its stock jump briefly above $12 a share after the buyout news. Other New England groups with stakes in Toll-like receptors include the University of Massachusetts Medical School, which has licensed such technology to Japanese drug maker Eisai Co. Ltd. to use at its R&D site in Andover.