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Joel,While it's possible that Perifosine will end the

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skitahoe   Saturday, 08/13/11 06:42:23 PM
Re: joelk post# 792
Post # of 5678 
Joel,

While it's possible that Perifosine will end the trial this year, and the end of the trial for AEZS-130 has occured, don't rush the approval process. It takes substantial time post trial to fully understand the data and properly present an NDA, AEZS has clearly stated it will be early next year before their submission on Solorel (AEZS-130) much the same should be expected of KERX on completion of the Perifosine Phase III, so conclusion this year may still take well into next year for NDA submission.

Small biotechs generally partner drugs because they simply don't have the funding required to do everything properly themselves when it comes to testing, manufacture, distribution and sales of what they've developed. Right now it's questionable in my mind whether KERX can do it alone in North America, or whether and even bigger partnership may be established where a big Pharma either partners with them, or even with all currently involved with the company for worldwide rights. Likewise, AEZS with most its personnel in Germany may have thoughts of handling European needs themselves, or again another major regional partnership may be in the works.

As small biotechs mature, they may emerge as major Biotechs if they're not bought out themselves. If for instance Perifosine were approved prior to a partnership for AEZS-108, AEZS could consider if they'd like to consider keeping AEZS-108 completely in house, or only contracting out that portion of the effort it couldn't possibly support. The difference between partnering and contracting is a tremendous amount of money. In a partnership they'd receive a tremendous amount of money up front, and the partner would typically pick up all expenses, then on approval they'd see nice royalties on sales, not earnings, of the drug. The partner might sell $1B a year, but earn $100M, while with a 10% royalty AEZS would also earn $100M for doing absolutely nothing. If on the other hand they keep the drug in house, they'll have to pay substantial money either for a manufacturing facility, or to contract for it. Then they must pay to build a distribution and sales staff, or again, contract for it. This is all in addition to the cost of gaining approvals which grows dramatically in Phase III.

Look at DNDN, many were sure they'd go to triple digits either on sales or once they partnered Provenge. I cannot say if they turned down partnership offers because in their mind they were simply not enough, or if no such offers were made as major Pharma wasn't interested in the logistics involve in individualized drugs. Regardless, much of the shine has come off the company with weak sales.

Personally I hate seeing big Pharma swoop in and buy promising drugs for what seems like a song, but I recognize it's often the best thing a company can do. Had DNDN gotten a partner on Provenge, I don't doubt that sales would have been greater as big Pharma has the wherewithall to build sales in a manner that DNDN didn't. Single digit or low double digit royalties may seem wrong when you've done all the heavy lifting, but with big Pharma pushing a drug it might be a blockbuster many times over, while a company like DNDN is actually losing money on its sales.

While I'd love to see AEZS grow into a major Biotech capable of fully supporting full development, manufacturing, distribution and sales of their own drugs worldwide, it's a huge effort for drugs with blockbuster sales. That's not true of Solorel. It's a niche drug, major Pharma's not that interested and as of it's approval there will be no competition with other products. Because the demand for it is anticipated to be small, the manufacturing capability may already exist, at least for its launch. In short, AEZS may keep this drug completely and while it won't earn billions, it can produce tens to hundreds of millions in sales, and at least tens of millions eventually in earnings.

I wish I could say what will be the next major event for AEZS, but in reality it has many opportunities and you never know what may interest a major Pharma. If they're more excited about something that's not yet in the clinic, they could partner that before a drug such as AEZS-108 is partnered. Clearly the earlier stage a drug is in its development the less that can be demanded for it, but if Company X really wants drug Y which is preclinical, they may pay more for it than drug Z which is in Pivotal trials, but they're not interested in it. Big Pharma clearly wants Blockbuster drugs, drugs which they feel certain will sell in the billions annually. If they see a drug as promising, but with a limited market, like Solorel, the fact that it should be easily approved means little, they're not interested.

I liked AEZS because of the breadth and depth of their pipeline. Once sales are established for bigger drugs like Perifosine, if AEZS isn't bought out, it truly could become a Biotech Giant, like Amgen. At one time I could have said like Genentech as well, but it's been bought out, spun off, and bought out again by Roche and I have a feeling they may spin off a percentage of it again.

My biggest investment mistake came in roughly 1990 when AMGN was suggested to me at about $15 a share and I didn't buy. If you look at AMGN in the last decade it did essentially nothing, but if you look at it between 1990 and 2000 it rose to perhaps $80 at the end of the decade, no big deal, but it split a total of 48 to 1 during that decade, Big Deal. In short it grew so fast that by 2000 it could no longer support the growth rate, and while a giant Biotech, like Giant Pharmas new blockbuster drugs just sustain it, while blockbuster drugs can explode the price of a tiny biotech, like AEZS.

Gary

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