Novartis Buys Protez For Super Anti-Biotic Defense

 

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Novartis AG (NVS) strengthened its specialty medicines development portfolio by buying the private, Protez Pharmaceuticals, Wednesday for $100M upfront and the potential for up to $400M dependent on meeting certain developmental milestones.

PZ-601, the lead compound, is a broad-spectrum beta-lactam, for the potential treatment of bacterial infections including complicated skin and skin structure infections (cSSSI) and potentially fatal drug-resistant infections like MRSA and ESBL. In May of this year, Protez began a phase II trial (NCT00671580; PZ-601-02).

The US, randomized, single blind, multi-center study was to evaluate the safety and efficacy of 750 or 1000 mg of SMP-601 in approximately 100 patients with cSSSI. The primary endpoint is improvement or resolution of clinical signs and symptoms of infection in the clinically evaluable population. Secondary endpoints included clinical response in the clinically evaluable, intent-to-treat [ITT], microbiological ITT and microbiologically evaluable populations. The results are expected early next year and regulatory approval in 2012.

According to the Centers for Disease Control and Prevention [CDC], two million people in the United States develop hospital-acquired infections each year, and approximately 90,000 die as a result. In Europe, an estimated three million hospital-acquired infections occur each year, resulting in some 50,000 deaths.

This acquisition makes sense for Novartis , who already markets daptomycin in Europe for cSSTI, and has recently acquired other in development targeting hospital based infections, such as Mycograb, Aurograb and Tifacogen.

While you could argue $100M-$400M is a pretty steep price to pay for a program with no clinically relevant human data and no IP position, I don’t think it is unreasonable. In fact, I think it was a pretty good deal for both sides.

For Novartis, the drug showed tremendous efficacy in pre-clinical animal models, and let’s face it, while some animal models are beyond terrible, a skin infection is a skin infection, plain and simple. The market they are targeting in resistant hospital infections has a monumental unmet need and is rapidly growing. The NPV of PZ-601 alone, with a substantial margin of error I’ll admit, is ~$300M. Certainly, proof of nothing but theoretically in the ballpark.

On the plus side for Protez, after being founded in 2003, they have raised $23M in private equity through series B so far. The company raised $21M of that total in 2006 and thus, in two years, the equity funds have exited with at least a 4x return based on $100M upfront. With the capital markets being so stingy towards IPOs lately, I’ll take that two year return anytime.

It will be nice when one of these drugs makes it to market, if for no other reason that we won’t have to listen to the popular press and their doomsday bacteriological scenarios. Of course, by that time, they ‘ll be beating the drums about something else they barely understand.

Comments

[RoccoVerducci]

Eben,

The carbapenem class of antibiotics has demonstrated excellent efficacy against a wide range of bacteria and make it an very good choice for presumptive therapy for infection.

Novartis has actually limited their financial exposure by structuring a deal that only has them paying $100M up front with the rest to be paid only if the antibiotic meets certain developmental milestones. Additionally, Novartis's scientists have no doubt done their due diligence with respect to the initial payment and the expectations are probably very high for this antibiotic.

Ciao