Replies to post #18146 on GTC Biotherapeutics (fka GTCB)

[croumagnon]

Excellent post and analysis MTB and I think you essentially covered all the basis and the reasons why some of us are still long GTCB...

"I think the advantages of GTCB's technology and pipeline will be seen by some BP with deep pockets as too damned easy a way to make lots of money in 4-5 years, not to simply snap it up before the French have closed their trap."

I suspect however that Cox is already in bed with LFB, and they probably have guaranteed his future with them. I think this is the only thing that makes sense in view of the latest horrible terms of the financing deal and his current behavior. Perhaps I am wrong but, left to Cox's choice, I am reasonably certain that GTCB will become a wholy owned subsidiary of LFB and managed by Cox...

On the other hand, I agree with you that GTCB is too attractive a candidate for takeover by Big Pharma at this stage, so maybe in spite of Cox such a takeover will occur very soon...

[OKY]

MTB: Thank You so much. Its long but clear and to the point LOL.

Nice Job

[vinmantoo]

MTB,

Good to hear from you, and thanks for a great post. While I previously made this post about deals, I was also thinking of this as a rationale for why GTCB has value for a buyout. I too hope we are headed for a buyout as it provides the only way for shareholders to take get value, and for GTCB's technology to have a real impact. Cox needs to be fired because there is essentially zero evidence that he has the ability to match a companies finances with its goals. Actually, I don't care if he is fired, just that a buyout occurs. I just wanted to repeat why I think the GTCB pipeline has great potential value to a buyer. It was in response to some of Dew's criticisms. I made a few modifications.


Big pharma and mid-sized pharma make deals all the time for drugs still clinical trials. These deals happen for phase I, phase II and phase III staged drugs. The payoffs are usually many years down the road, especially for the phase I and phase II drugs, but sometimes even for phase III if it involves diseases like cancer. Pharma makes a bet with an uncertain payoff (i.e. outcome of the trials) and many fail. This doesn't stop pharma from making deals. The dollar amount of the deal is based probability of success, which correlates to the stage of trials, and the potential market size if the drug is successful. There is no guarantee of success, only a probability.

What hurt GTCB is the idea that the FDA might never approve transgenic drugs or keep delaying. This meant that no matter how good the drug was, it couldn't be sold. That uncertainty has been removed by FDA approval so now the multli-billion dollar potential of GTCB's pipeline is real and more akin to other pipelines containing drugs being developed using cell culture. In fact, there is an advantage for GTCB because we know the plasma proteins will be sucessful as therapy, and so will the monoclonal antibodies. We also know the markets will be huge. The two uncertainties, whether the drug will be successful and the market size, usually present in drug development deals have been removed. Yes, FOB legislation needs to be approved, but it doesn't need to be approved, this week, this month or even this year for deals to be made. It will be approved, hopefully sooner rather than later, but it will be done.

As I stated above, pharma always makes significant bets on drugs they don't know will payoff. I don't understand why you think pharma wouldn't make a bet when they know GTCB has goats making plasma proteins that already have a billion dollar market from plasma derived sources. I don't understand why you think pharma wouldn't make a bet when they know it will payoff after FOB legislation is passed. They won't be sitting around twiddling their thumbs while they wait for FOB legislation to pass. Rather the time will be used for maximizing purification proceedures and tests to confirm bio-equivalence so they can hit the ground running when FOB legislation does get passed.

[cleith]

Great post MTB. I agree with many of your points. I also agree and hold out hope that there will be a buyout before now and June. My gut instincts say that something significant will happen before June. The Invisible Hand of the market will intervene.

[floblu14]

I, 3, agree that MTB expresses the current positive opinions of most longs -

As I've metioned in several of my illustrious posts :-)

1. No restructuring - no one canned!

2. One new career posting - better than none & a beginning!

3. Sir Ashley - still pictured in pursuit of FOB's

4. No buying or selling by management - news soon??

5. A while ago, JL posted that Dr. Ornella Cuomo of the U. of Naples was beginning human clinical trials with Antithrombin for STROKE. GTC management knows this. Now if she would use ATRYN...the lid would blow off the goats!!
http://stroke.ahajournals.org/cgi/content/abstract/STROKEAHA.107.488486v1

http://www.chestjournal.org/content/104/3/882.abstract

6. BP must know about GTC & ATRYN approval. It's worth the wait for a potential buyout -

Over & in -- :-)

[gym gravity]

MTB

>>For some BP to gamble $200 million to buy GTCB, then to devote $100-125 million to get it through the next 4-5 years, then reap multiple billions of dollars in F. VII, VIII, IX; CD-20, etc sales seems a fairly high probability event. These are low risk biologics, with huge markets that would then have 5-7 years before loss of IP patent protection. If I had the money (and I was just talking with a deep-pocketed VC firm), it makes a compelling story -- even more so given the years of failure to get here.

I felt like looking at up what parts of gtcb could cost, long term, for a Big Pharma, or a government.

for about $50m down they get a staff of people expert in protein purification. (they are hiring, by the way, so either that means someone important left or that they are getting bigger: http://www.gtc-bio.com/about/career.html )

As Dew keeps hinting, it is incredibly difficult to bring a biologic to market, he probably knows how many versions of Herceptin, Rituxan or Avastin never made it to trials.

If bringing FOB's to market isn't going to be any easier time wise than making novel drugs, a GTCB suitor would benefit from deep pockets to do three things:

1) Flesh out the plasma protein portfolio at a steady pace…cost MTB guessed was $100-125m for 4-5 years. Add to that Included in this is whatever else happens on the farm at the capacity of production from 2008.
2) Quickly license or design new antibody drugs with new epitope targets, or antibody subtypes of other targets, from a library like Dyax’s…Dyax gets $5m upfront cash from biogen for their new search together, $85m in milestones I think after that. For a fell swoop buyer of a whole transgenics biologics facility, they would need $5-10m per year to pan for novel drugs, either themselves, or in licensing, because GTCB doesn’t do drug discovery (yet).
3) Start running trials hand over fist at $100m year, a quick estimate at the expenses the farm known as GTCB could incur if it had about 8 drugs in trials at once.

This works if the Big Pharma suitor is starting from scratch and have an existing pile of working cash. The strategy would be to get as many novel biologics as they can into the clinic while they still enjoy patent exclusivity on production, assuming anyone other than existing transgenic producers would be interested in using goats. (11 more years for the milk patent) and 7-10 years to get new ones to market, because as Genzyme has shown, when you switch a bioreactor, it is going to need additional consideration.

So a 1-3yr window between milk patent expiry and time when a competitor can challenge it for sale in countries that care to enforce it, and for the long term, a cost advantage on production of flurry of antibodies. The new company should keep a careful eye at patent expiration in case any of the new pipeline fall under a "biosimilar legislatory" advantage, and have the cash to initiate pre-clinical work on as many novel biologic antibody:epitope drugs, produced and ramped up at efficient prices.

Expect the “late to the biologic party” pharma like Sanofi or Gilead to sign a deal with a discovery company like Dyax soon.

That 1-3year window might not close if only Pharming, Progenetics, LFB and PIP are competitors. 5 companies could slice up the billion dollar transgenic pies or they could merge to 3 or 2 or 1 (GE could come to mean genetic engineering and general electric).

(just wanted to note the genz-dyax-gtcb puzzle pieces seem to fit better sometimes than others)