La Jolla Pharma Faces End Game As BioMarin Dodges Bullet
February 12 2009 - 1:00PM
Dow Jones News
The failure of its lead product candidate, Riquent, may be the
end of the road for tiny biotech La Jolla Pharmaceutical Co. (LJPC)
and may leave recent partner BioMarin Pharmaceutical Inc. (BMRN)
with a hole in its late-stage pipeline.
Many viewed the San Diego-based La Jolla as high risk, given
Riquent's previous failures and targeted use in lupus, a
notoriously difficult to treat disease. But its failure leaves the
company with little cash and few products in its pipeline to
develop.
"As Riquent is LJPC's only product, we anticipate LJPC is likely
to end operations," said analyst Liana Moussatos with Pacific
Growth Equities
Shares of La Jolla recently traded down $2.03, or 88%, to 28
cents, cutting its market capitalization from $128 million to just
$14 million. BioMarin shares dropped 43 cents, or 2.2%, to $19.
Though BioMarin only recently signed on with La Jolla, it was
smart to incorporate the historical risk of the program into their
agreement and walked away only mildly bruised.
La Jolla officials weren't immediately available for comment,
but an early Thursday press release stated that it would provide
more guidance on its strategic options in the future. Moussato
estimates the company has only enough cash to last until May.
The study of Riquent came to an end after an independent data
monitoring board conducted an interim analysis and determined that
continuing the study was futile. La Jolla is evaluating the results
from the completed portion.
The news marks another bump in the road for Riquent. In 2004,
the Food and Drug Administration indicated the drug was approvable
after its previous late-stage trial failure, but needed an
additional study to reach the market.
Riquent reduces antibodies associated with lupus, which should
make patients less likely to experience "flares" of kidney-related
inflammation.
Analyst Terence Flynn from Lazard Capital Markets believes the
mechanism of Riquent could simply be aiming for the wrong target in
treating the disease.
"This news is disappointing, but in no way surprising as Riquent
has failed two prior Phase III trials," said Cowen & Co.
analyst Phil Nadeau.
Shrewd Strategy
The failure comes just five weeks after BioMarin paid $15
million to La Jolla in order to develop and market Riquent
worldwide. Though it lost that money, BioMarin should have no
further obligations and may have been wise to structure a deal that
was so dependent on Riquent's success in later stages of
development.
If the study had continued and failed on the final analysis,
BioMarin would have had already paid La Jolla $52.5 million, notes
Leerink Swann analyst Joseph Swartz. BioMarin had $563 million in
cash and securities as of Sept. 30.
"While some may question the rigor of management's extensive due
diligence that led to the collaboration just a month ago, we
applaud their shrewd use of real options to limit financial
exposure," he said.
Though its exposure was limited in the Riquent failure, the loss
leaves BioMarin with a hole in its pipeline for drugs in late-stage
development. The company will likely need to cut additional deals
in order to fill that hope and reassure investors of its future
prospects.
BioMarin will make "investments in future growth and continue to
look for attractive late-stage in-licensing or acquisition
opportunities," said Chief Executive Jean-Jacques Bienaime in a
statement.
BioMarin had third-quarter revenue of $72.6 million. It's
products are Aldurazyme, marketed by Genzyme Corp. (GENZ), to treat
a fatal genetic disorder, Naglazyme, which treats a similar
disorder, and Kuvan, for phenylketonuria, another genetic disorder
treatment that is sold with Merck KGaA (MRK.XE).
The company's bet on lupus was largely seen as a long shot to
get into a lucrative market, because of the drug's previous
failures and the difficulty in developing treatments for the
disease.
There are currently few options for patients with lupus, a
chronic autoimmune disease in which the body attacks itself,
causing inflammation and tissue damage virtually anywhere in the
body.
The condition can still be difficult to diagnose, which has made
the design of clinical trials historically difficult.
Current treatments include anti-inflammatory drugs, steroids,
anti-malarials and immunosuppressants. Those routes can lead to
serious side effects, but no new drugs have been approved to treat
lupus for decades.
Last year, Rituxan, sold by Genentech Inc. (DNA) and Biogen Idec
Inc. (BIIB), failed in a late-stage trial in treating lupus.
Later this year, Human Genome Sciences Inc. (HGSI) is expected
to have late-stage data of its LymphoStat-B in treating lupus.
-By Thomas Gryta, Dow Jones Newswires; 201-938-2053;
thomas.gryta@dowjones.com