Axys, PPD form $60 million pharmacogenomics firm
Axys, PPD form $60 million pharmacogenomics firm
By RANDALL OSBORNE
Healthcare InfoTech Contributing Writer
Aiming to capitalize on the promise of pharmacogenomics and fulfill the pledge made during a controversial takeover completed last year Axys Pharmaceuticals (South San Francisco) has entered a deal with contract research organization PPD (Wilmington, NC) to absorb two of PPD’s subsidiaries to form PPGx, a company valued at more than $60 million.
PPD’s two subsidiaries involved in the deal, Intek Labs and Intek Labs Ltd., specialize in genotyping, phenotyping, and large-scale DNA purification and archiving. The deal calls for PPD to provide bioinformatics services and staffing.
"We’ve implemented the acquisition strategy we had, and we’ve clearly built tangible, realizable value," said John Walker, chairman and CEO of Axys, which has licensed to PPGx its bioinformatics software, Allele Frequency Database of gene polymorphisms, and pharmacogenomics intellectual property
PPD paid $11 million for an 18% interest in PPGx, not including the software-licensing fee, Walker said. Other terms of the agreement call for Axys to receive an up-front license fee and majority ownership of the new company. PPD gets worldwide marketing rights to PPGx’s pharmacogenomics products and services, plus a minority ownership position.
PPGx will operate from La Jolla, Calif., with labs in North Carolina and the U.K., providing services to pharmaceutical and biotechnology firms. Jean Warner, vice president of medical affairs for Axys, has been named CEO of PPGx.
In May of last year, Axys formed Xyris a majority-owned agricultural biotechnology subsidiary. Axys itself is the result of South San Francisco-based Arris Pharmaceutical Corp.’s takeover of La Jolla-based Sequana Therapeutics (see BioWorld Today, Nov. 4, 1997).
When that $166 million deal was disclosed, a 5% Arris shareholder protested the acquisition and asked for restructuring of the agreement, claiming more shareholders also objected.
But with the Sequana takeover came $50 million in cash and $70 million in guaranteed partner funding, Walker said. The Xyris and PPGx spin-outs total another $90 million in value more than vindicating the plan outlined by Arris when the Sequana deal was taking place, he said.
"We tried to be clear at the time that we were not acquiring Sequana for the deals it had done, but for the deals it had not done," Walker said. "Now, we just want to declare victory and move on."
After studying the market and conducting focus groups, he said, Axys is taking a new, less research-oriented approach to pharmacogenomics service through PPGx.
PPGx’s strong bioinformatics capability is important to its effort, Walker said. "We have the customer’s perspective. How you identify genes is not what the clinical-development guy cares about. He cares about the relationship between that gene and his drug."
The CRO market is expected to grow 20% to 25% annually "for the foreseeable future," Walker said, with pharmaceutical companies outsourcing more services. PPD’s revenues last year jumped to $285.6 million, an increase of 21% over 1997. Diluted earnings per share for last year’s fourth quarter jumped 93% over the fourth quarter of the previous year, to $0.29.
"[Pharmaceutical companies] don’t choose CROs on a one-stop-shop’ concept," Walker said. "They seek best-in-class capabilities. We want to be best-in-class.’ PPD had already made a move in this direction by acquiring Intek Labs in 1997."
PPGx, which incorporates Intek, likely will become "a profit contributor [for Axys] in the year 2000 and beyond," Walker said.
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