Mondobiotech Drug Gets New Hope, But Questions Remain

Switzerland's Mondobiotech Holding AG (RARE.EB) received a key lifeline for one of its lead pipeline products from United Therapeutics Corp. (UTHR), which is attempting to expand its reach in treating a form of high-blood pressure.

The move gives the drug, aviptadil, another chance after Biogen Idec Inc. (BIIB) dropped the product recently after evaluating its data and the potential market. Mondobiotech estimates the drug has a sales potential of 1 billion Swiss Francs, or about $928 million; however, others aren't as optimistic.

"A new partner for aviptadil doesn't increase the product's chances to reach the market," said Andrew Weiss, biotech analyst with Zurich-based bank Vontobel. "Actually, the fact that Biogen seems to have had a negative read out indicates a higher risk for the drug candidate."

"The drug failed to convince Biogen Idec's scientists that this is a $1 billion drug. Otherwise, they would have not returned it," he said.

Officials from Mondobiotech weren't available for comment.

Aviptadil is being studied as a treatment for pulmonary arterial hypertension, a competitive area with major players continuing to fight for a slice of the growing market. Cowen & Co. projects the worldwide annual market at about $4 billion, with current therapies only penetrating to about $1.5 billion to $2 billion.

Pulmonary arterial hypertension, or PAH, is continuous high blood pressure in the pulmonary arteries that makes patients susceptible to heart failure. The market is dominated by Swiss-drugmaker Actelion Ltd.'s (ATLN.VX) Tracleer pill, which generated 2008 sales of CHF1.3 billion, or about $1.2 billion. Other drug makers include Gilead Sciences Inc. (GILD) and Pfizer Inc. (PFE), while a number of companies are also developing new treatments.

United Therapeutics sells three treatments for the condition, and the deal with Mondobiotech shows its efforts to continue its presence.

"We are always looking to expand our reach within pulmonary arterial hypertension," said Andrew Fisher, United Therapeutics spokesman.

The latest data on the drug hasn't been detailed, and both United Therapeutics and Biogen declined to comment. A Biogen spokeswoman said the company walked away from aviptadil in December after evaluating its data and the potential market.

Fisher said the drug remains in Phase 2 testing as the company plans to see how patients respond to higher doses before it decides on the next step in the program.

Its development is already well behind Mondobiotech's original projections for a 2007 launch, and Chief Executive Fabio Cavalli recently said he expects the drug to reach the market in 2012.

Mondobiotech went public in Switzerland last August by way of a placement of existing shares that have lost 68% since their first day of trading to close at CHF122 Friday--mainly due to raising capital despite having no products on the market yet.

Still the stock price gives the company a market valuation close to CHF700 million, which some consider hugely overvalued, because aviptadil is one of the company's most advanced development products.

"Applying a usual early-stage biotech company model, we reach a fair value of around CHF20 per share or a market capitalization of between CHF100 million and CHF120 million," analyst Weiss said.

Fisher declined to provide financial details of the licensing deal, but said United Therapeutics has complete control of the program and that any subsequent payments to Mondobiotech are "back-end weighted," meaning they will come at later stages of development.

Meanwhile, Mondobiotech--which has its headquarters in a 16th century Capuchin monastery in central Switzerland that's currently undergoing renovation with the help of star architect Norman Foster--has decided to raise capital, but the uptake has been slow so far.

"Mondo resorting to a capital hike shows that the company needs funding. They have a large infrastructure--including Mr. Cavalli's corporate jet--and no products on the market yet," Weiss said.

-By Thomas Gryta and Julia Mengewein, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com

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