Tuesday, March 31, 2009

Genzyme to pay Bayer up to $2.8B for MS, cancer drugs

By Mass High Tech staff

Genzyme Corp. has entered a deal with Bayer HealthCare in which the Cambridge biotech giant will pay up to $2.8 billion to acquire three Bayer drugs -- Campath, to treat multiple sclerosis, and Fludara and Leukine as cancer treatments. The deal requires no upfront payments.

Up to this point, Genzyme (Nasdaq: GENZ) and Bayer have shared development responsibilities of Campath, known generically as alemtuzumab. Once it is approved by the U.S. Food and Drug Administration for treating MS, Genzyme will assume development and commercialization responsibility and will pay Bayer up to $1.25 billion over ten years. Genzyme will also pay a $900 million buyout option to Bayer in 2020, or else begin paying Bayer milestone payments based on Genzyme’s worldwide sales of Campath, starting in 2021. Bayer will hold the option of co-promoting Campath alongside its other MS treatment, Betaseron.

In exchange for the acquisition of Fludara, Leukine and Campath in oncological treatments, Genzyme will pay Bayer $500 million over eight years. If annual revenue targets are met over the next three years, Genzyme may pay Bayer another $150 million in milestone payments.

Genzyme is expected to begin production of Leukine once its new manufacturing plant in Seattle is approved by the FDA. The plant, which cost between $75 million and $100 million, will employ Genzyme workers once it is opened next year. In the meantime, Bayer will supply Fludara and Leukine.

In exchange for the nearly $2.8 billion in potential payments, Genzyme is expected to gain 2009 revenue of about $185 million from the three drugs and up to $700 million over the next three years. By comparison, the company reported $117 million in 2008 revenue from its oncology sector.