By Malorye A. Branca
July 14, 2004 | Genzyme is making a bold commitment to cancer drug and diagnostic development. By purchasing ILEX Oncology for $1 billion and IMPATH’s cancer testing service for $215 million, Genzyme hopes to substantially boost its nascent oncology franchise and claim some of the burgeoning targeted cancer therapies market. “Oncology is a hot place to be. It’s wise they decided to make inroads there,” says Phil Nadeau, senior biotech analyst at SG Cowen & Co.
The IMPATH purchase is a particularly sweet deal. “IMPATH is well known and has consistently operated a service of the highest quality,” says Mara Aspinall, president of Genzyme Genetics. “They went into bankruptcy because of financial irregularity.” The Securities and Exchange Commission launched a formal investigation into IMPATH’s accounting practices in September 2003. Genzyme was the lone bidder for the company’s genetic testing unit, which will be folded into Aspinall’s business.
While Genzyme Genetics is best known for prenatal, pediatric, and fertility-related testing, “IMPATH has one of the country’s broadest available menus of complex and sophisticated tests for diagnosis and monitoring a wide variety of cancers,” Aspinall says.
The purchase also neatly complements Genzyme’s February bid to acquire ILEX -- a small company specializing in oncology, with a solid portfolio of in-licensed compounds. ILEX’s Campath, a leukemia drug, commanded $70 million in sales in 2003 and is poised to reach almost $90 million in 2004 worldwide sales. Schering AG markets the drug.
ILEX has two late-stage drugs, one awaiting approval (Clofarabine) and one in Phase II (ILX-651). It also has “experience in putting together a dossier and getting drugs through the FDA,” says Mark Enyedy, senior vice president and general manager of Genzyme Oncology. Enyedy will lead the merged entity.
Genzyme, meanwhile, has some promising projects further from the clinic that “we like very much,” Enyedy says. The ILEX purchase provides revenue generators to help keep those products moving and gives the company momentum in a new arena.
“We believe oncology is an area of tremendous growth,” Aspinall says. It has also has a familiar feel because it includes many relatively uncommon diseases. “Genzyme has historically made money by treating small genetic diseases,” Nadeau says. “They are realizing that in the next few years, they will probably have picked all the low-hanging fruit there, and need to branch out.”
Targeted therapies, such as Genetech/Roche’s Herceptin and Novartis’ Gleevec, are the hottest trend in oncology. A growing number of these products are coming to market. “Targeted therapies, in particular, are poised for huge growth,” Aspinall says. “A large percent of Phase II and III trials involve focused cancer therapeutics.”
Genzyme, she says, sees an opportunity in “having a full spectrum of oncology services from diagnostics to therapeutics.”
The company also has a novel source for oncology targets. Thanks to its pioneering work with the SAGE gene-expression mapping and measurement technology, Genzyme has what Enyedy calls “the largest database of cancer genes in the world.” Some intriguing cancer vaccines are now emerging from that work.
Cash-rich but pipeline-poor, Genzyme’s oncology bid is just one aspect of a major makeover. In 2003, Genzyme paid $600 million in cash for SangStat Medical Corp., which specializes in transplantation-related therapeutics. Then in Feb. 23, 2004, Genzyme purchased most of genetic testing company Alfigen’s assets for an undisclosed fee.