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DewDiligence

07/15/08 10:00 PM

#64309 RE: zipjet #64304

Analysts Need Convincing on VPHM-LEVP Deal

http://www.reuters.com/article/marketsNews/idINBNG18219520080715

›Tue Jul 15, 2008 3:53pm EDT
By Jennifer Robin Raj

BANGALORE, July 15 (Reuters) - ViroPharma Inc (VPHM.O: Quote, Profile, Research, Stock Buzz) said it agreed to acquire Lev Pharmaceuticals Inc (LEVP.OB: Quote, Profile, Research, Stock Buzz) for $442.9 million in cash and stock, to add Lev's Cinryze, which targets hereditary angioedema [sic] disease (HAE), to its pipeline.

However, ViroPharma shares took a hit as investors questioned the market potential of Cinryze, which faces competition for approval from several other drug candidates.

ViroPharma shares fell as much as 23 percent on news of the deal, which pays Lev shareholders $2.75 a share, or a 49 percent premium to Lev's Monday close.

"It's very hard to understand why ViroPharma would pay such a significant premium to gain access to what could end up being a very small drug," Susquehanna Financial Group analyst Jason Kolbert said and called the deal "very disappointing".

In a conference call, ViroPharma's Chief Executive Vincent Milano said, "We believe Cinryze to be at least $250 million to $350 million product a year at peak, with margins of between 65 percent and 70 percent."

However, Kolbert said investors were not wholly convinced of the estimate.

ViroPharma's spokeswoman Kristina Broadbelt said the company's projections were based on sales of other orphan drugs that treat very rare diseases.

Cinryze, which has an orphan drug status, is currently under regulatory review for approval. The U.S. Food and Drug Administration has set a review date of Oct. 14 for the drug.

Orphan drug status is given to drugs that treat diseases affecting fewer than 200,000 people in the United States and grants drug developers seven years of market exclusivity.

HAE, which causes swelling in various body tissues, can be a life-threatening disease that affects up to 10,000 in the United States and is caused by genetic deficiency of a certain protein, ViroPharma said in a statement.

Janney Montgomery Scott analyst Brian Rye also believes there is some uncertainty about the approval and competitive landscape, but added that if Cinryze was approved, it could prove to be a compelling acquisition.

RACE FOR APPROVAL?

There are several competitors racing to get a drug approved for HAE, including CSL Ltd (CSL.AX) unit CSL Behring, Dyax Corp (DYAX) and German company Jerini (JI4G.DE).

FDA's review date for CSL Behring's HAE drug, Berinet, is set for September.

ViroPharma's Broadbelt said the company could not speculate on what would happen to Cinryze's launch if Behring's drug was approved ahead of Lev's product, but added that the two products were focusing on different treatment pathways.

There is acute treatment, which focuses on treating the patient after an attack, and there is prophylactic treatment, which focuses on preventing the attack, Broadbelt added.

While competitors have acute data, Cinryze is the only drug that also has prophylactic data, she said.

The FDA has indicated that they are looking at acute treatment and prophylaxis as two different treatment pathways, she added. [VPHM said on the CC that they independently verified this.]

Earlier today, Jerini, which is being acquired by British drugmaker Shire Ltd said its product for HAE, Firazyr, had been approved by European regulators. However, Firazyr received a "not approvable" letter from the FDA in April.‹