Millennium Gets a Product, and Capabilities

Millennium Pharmaceuticals Inc.'s acquisition of Cor Therapeutics Inc. brings the technology integrator a marketed product (Integrilin), the infrastructure that supports it, and, in Vaughn Kailian, Cor's CEO who will now head Millennium's commercial operations, a highly capable biopharmaceutical executive. The firms says their research programs are complementary--even if they don't appear to be at first glance.

The strategic impetus behind Millennium Pharmaceuticals Inc. 's acquisition of Cor Therapeutics Inc. isn't as apparent as the driver for MedImmune Inc. 's deal for Aviron . (See "MedImmune Reaches for a Blockbuster," in this issue, , [A#2001800250) Nor can Millennium take advantage of the same market situation as did Cephalon Inc. , which recently purchased Groupe Lafon . (See "Biotechs' Holiday Shopping Spree—Buy, Buy, Buy," in this issue, , [A#2001800243) The Cambridge, MA-based technology integrator isn't valued on sales the way Cephalon is—one danger of the deal is that its valuation will shrink as analysts recalibrate their measuring sticks.

Indeed, in buying a company whose stock hasn't performed particularly well—because of the slowing growth of Cor's lead product, eptifibatide (Integrilin)—Millennium hasn't exactly wowed investors. Millennium's stock was trading at $35.45 when the deal was announced December 5; it quickly dropped to $25.40. SG Cowen analyst Eric Schmidt figures Cor's stock price, which jumped to $28.20 upon the news, up from $19.74, had been trading low for a reason: a weak pipeline and unimpressive prospects for Integrilin, an anticlotting agent. Millennium, he says, has plenty of managers of its own and doesn't need Cor's team. "They just paid a helluva lot to buy Integrilin," he declares.

Cor's story is a saga of ups and downs. The firm signed what was, in 1995, one of the highest-valued biotech deals up to that time, when Schering-Plough Corp. agreed to develop and commercialize Integrilin, even paying the lion's share of research, and still giving Cor about half the proceeds from marketing. Cor had no Phase III data at the time, and when the data came in later that year, it showed that Integrilin didn't do much more than placebo for angioplasty patients. Cor and Schering did another trial, for the bigger market of unstable angina, and Cor struggled to convince FDA to grant that broad label. The time spent tussling meant Integrilin was the third to market, where it languished.

Cor quietly did yet another study, and wound up with data showing that it gave it an edge against competitors. Integrilin quickly became the most prescribed drug in the class, though not the market leader in terms of sales dollars because abciximab (ReoPro), from Johnson & Johnson unit Centocor Inc. , is a much more expensive drug. But despite Cor's resurrection as a competitor, the overall market itself has not grown as much as analysts expected. And growth may slow further still, if drug-impregnated stents can reduce the number of follow-on angioplasty procedures.

But the Integrilin story is far more success than disappointment. And in buying Cor, Millennium is getting far more than a product. It gets in Vaughn Kailian, a proven CEO who has created an important biopharmaceutical business, a market-leading product and the development organization and sales force which resurrected it.

These are precisely the commercial assets that Millennium badly needs. The company had been looking for the last year or so to identify a merger candidate that would fit well with the firm, and help it achieve its goal of "building the biopharmaceutical company of the future within the next decade," says Marsha Fanucci, VP, M&A.

Millennium had some explicit criteria, she explains. It wanted to leverage the things it already had, and bring in something different—in particular, commercializing infrastructure and the ability to go to market. It was also looking for a firm that could produce "the same type of breakthrough products" Millennium is after—which in general means drugs for life-threatening illnesses such as cancer and acute cardiovascular disease—which best lend themselves to the personalized medicine approach Millennium is after. She declares: "Cor fit every one of the metrics we set out."

Most important: Cor was willing to do the deal. The wild market gyrations of the last year—taking up and down the stocks of Millennium and its targets—derailed many negotiations.

Still, there is the inevitable question: just how good is the match between Millennium and Cor? Kailian insists the fit between the firms is a good one, although he acknowledges that the companies began their discussions far apart, questioning why they were even talking with one another. "We thought, ‘Millennium was just a tool company.' They thought, ‘Cor was just Integrilin,'" he explains. "Mark [Levin, Millennium's CEO] said, ‘You have to come talk to our people,' and I said, ‘Well you have to come and talk to ours,' and when we did, we realized we were two companies focused on biology."

Already there is tangible evidence of complementarity, Kailian says, noting that the RTK inhibitor Cor is steering towards clinical trials next year is targeted to AML (acute myeloid leukemia) patients with a specific genetic subtype. That characteristic means the drug fits well with Millennium's goal of developing personalized medicines which are highly efficacious because they are directed, generally with a molecular diagnostic, to highly specific patient populations. And Millennium will apparently extend its pharmacogenomics platform to other projects in Cor's portfolio, which have not yet been seen publicly, says Fanucci.

The two companies also argue they are therapeutically complementary. Cor is focused on cardiovascular medicine and oncology, and had begun early research in inflammation. Millennium, in addition to cancer, has research programs in metabolism and inflammation. Kailian says, "If you think about the association of diabetes and cardiovascular problems, and you think of atherosclerosis as inflammation, you see there are a lot of synergies on that side of biology."

How good is the marketing fit? Kailian points out that Cor has a hospital sales force focused on tertiary care centers, the teaching hospitals, "and that's exactly where Millennium's proteozyme inhibitor will go." But is going into the same building much of a benefit, if the sales reps are calling on such different sorts of physicians—cardiologists and oncologists?

Kailian notes that when he grew up in the business, sales reps walked into hospitals pitching products in as many as five therapeutic areas at a time. "If your sales force can't handle two, they've got a pretty narrow bandwidth. They should be able to walk on both sides of the street, and we'll train them to do that," he declares, adding, "that doesn't mean you won't need some dedicated people to go to specialists…but it doesn't take many people to penetrate oncology."

Even if sales reps have to call on different physician types, Kailian is confident that, "they'll be able to ride on the back of Integrilin, which has over 50% market share."

Perhaps the most surprising part of this deal is the role Kailian himself will play. He could easily have cashed out with the deal, but he's not. He will now be vice chairman of Millennium, responsible for heading up commercial activity. "I'm going to focus on making them a product-oriented commercial company. That's what I did at Cor, and why Integrilin became a market leader," he says.

He also says he's going to move from the Bay Area to Boston—probably in the first quarter of 2002. In any event, he's apparently convinced Millennium's management that he will. Says one senior Millennium executive: "He says he will and when he says it, he looks a lot different than the guys at LeukoSite looked when they said it"—most of the top LeukoSite executives eventually left the company. With Kailian goes Charles Homcy, who will be coming into Millennium as its new head of R&D—relieving Mark Levin of the burden of integrating R&D, and hopefully reassuring analysts who'd grumbled that he shouldn't carry that load for long. Formerly with Lederle, Homcy is experienced at guiding commercially-oriented research.

Both execs will no doubt relish having more wherewithal than they did when Cor was on its own. As successful as Cor could have been, says Kailian, it just couldn't create the critical mass it would have needed to be highly successful. Selling out to Millennium immediately gives Cor more financial and scientific strength and perhaps the funding to do the kind of in-licensing Cor simply had not been able to afford.