GPC/ Altana: A New Middle Market for Big Genomics Deals? Probably Not

Even as Big Pharma deals for big genomics technology tapers off, GPC Biotech and mid-sized Altana are forging ahead with their own program: a $100 million alliance to set up a genomics center for Altana. Separately, Altana could pay GPC milestones on scientific and clinical success. But this deal doesn't signal a trend towards mid-sized company dealmaking. First, both companies have collaborated before and second, they aren't interested in technology transfer.

Among Big Pharma, the market for big genomics technology deals is well nigh saturated, or so one would be led to believe by the stunning drop-off in research-stage deals of any significant size. The name of the game today is products—which is why the last two major deals out of Millennium Pharmaceuticals Inc. both hinge, for their success, on delivery of compounds into the clinic, not simply targets or technology (though access to Millennium's discovery platform was clearly a motivating factor for both Aventis SA [See Deal] and Abbott Laboratories Inc. [See Deal] (See "Dealmaking for the Revolution," IN VIVO, March 2001 [A#2001800063.)

Which isn't to say there's no market for big technology deals—as the recent arrangement between GPC Biotech AG and the mid-sized German Altana AG and its pharmaceutical subsidiary Byk Gulden Lomberg Chemische Fabrik GMBH attests [See Deal]. GPC claims, correctly, that the deal is the biggest German biotech alliance ever signed: more than $100 million in premium-priced equity, tech transfer fees, and FTE funding to set up a genomics center for Altana in Waltham. In a separate drug collaboration in two therapeutic areas, Altana could pay GPC additional milestones on scientific and clinical success.

Importantly, the deal isn't like the Millennium deals mentioned above or the $600-800 million alliance Vertex Pharmaceuticals Inc. signed with Novartis AG [See Deal]. For the most part, GPC doesn't promise Altana success—it simply sets up its genomic capabilities—which Altana then gets to use royalty-free, more or less along the lines of Millennium's $217 million tech-transfer deal with Pharmacia Corp. division Monsanto Co. [See Deal] or the royalty-free tech transfer deals Pfizer signed in 1999 with Neurogen Corp. , [See Deal] and ArQule Inc. [See Deal]). Meanwhile, GPC gets to focus its efforts on building its own pipeline, including its recently in-licensed phase I bryostatin-1 and various analogs of the anti-cancer drug [See Deal]. Had the Altana deal been a joint venture, GPC president and CEO Bernd Seizinger, PhD feels, "I would have worried about whether an internal oncology program was somehow contaminated by the alliance."

And now, figures Seizinger, GPC can go off and sign other non-exclusive deals, exploiting what he believes is the new genomics dealmaking market among mid-sized European companies which are still relative novices in the new technologies.

But whether there is a vast new market for dealmaking is questionable. In the first place, the deal is the third alliance between the two companies—and if Altana hadn't grown comfortable with the first, signed in 1998 (aiming to find an H. pylori target [See Deal]) and the second (in oncology [See Deal]), they would never, says Seizinger, have been willing to buy the tech transfer arrangement.

Moreover, Altana is among the wealthiest companies of its size both in cash and near-term pipeline. It has better than half a billion dollars in sales and royalties flowing in each year from the proton pump inhibitor pantoprazole (Protonix). And it's still sitting on the DM 1 billion it got from selling its Milupa nutritionals business five years ago. Meanwhile, it has three late-stage products (two phase III respiratory compounds and its phase I/II acid pump antagonist, the so-called reversible proton pump inhibitor) all of which are the subject of intense licensing interest from many of the major pharmaceutical companies. As one Altana executive noted: "We've got so much cash, I'm not sure we know how to spend it." That's a position few other mid-sized European companies are in.

Still, GPC has time to sign new deals. The Altana arrangement nicely pads its cash position, giving it three to four years before it has to go back either to the market or to a major new partnership.