FDA Delays Hit Genzyme, Isis JV Deal

Regulatory demands will result in delays for cholesterol-lowering candidate Mipomersen. Isis gets a downgrade on the news.
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Genzyme

(GENZ)

and

Isis Pharmaceuticals

(ISIS)

, which teamed up in a

well-received deal in January

, have encountered regulatory turbulence. The pair on Friday announced expected delays in approvals of their cholesterol-lowering product, news that sent shares of Isis down more than 20%.

Food and Drug Administration requirements will result in a one-year delay in Mipomersen -- the cholesterol-lowering antisense drug at the heart of the Genzyme/Isis deal -- in its smaller and nearest-term indication and a multiyear delay for a broader, potentially more lucrative indication.

The FDA is now asking for data from two ongoing preclinical carcinogenicity studies in order for the drug to be filed in homozygous familial hypercholesterolemia, a severe form of high cholesterol that creates an increased risk of premature cardiovascular disease. The companies now expect to file for this indication in 2010, a one-year delay.

For broader, high-risk populations, the U.S. regulatory agency will require an outcomes study. "This appears to represent a shift in FDA thinking away from surrogate marker approvals for drugs that treat hypercholesterolemia," wrote Cowen and Co. analyst Eric Schmidt in a note to investors.

Per the new requirement, the companies have sped up plans for an outcomes trial in high-risk patients that will begin in 2009. Traditional outcome studies include 10,000-plus patients and take five to 10 years to complete, but the companies said they expect their trial can be smaller and shorter. However, they didn't provide specifics on a Friday morning conference call.

"Having outcome data earlier on in the development process will be important to patients and serve to enhance the value of this treatment," said Genzyme CEO Henri Termeer. "We plan to engage in discussions with regulatory agencies in Europe and the rest of the world, and look forward to receiving their feedback."

Executives didn't say whether the regulatory clarity would affect the financial terms of their deal, which has yet to close. Bear Stearns analyst Mark Schoenebaum said in an email to investors that he believes a renegotiation in favor of Genzyme is likely.

The terms announced in January included $325 million upfront, $825 million in milestones tied to development (with $200 million of that related to the first indication) and $750 in commercial milestone payments (which come into effect once the companies have achieved $3 billion or higher in peak sales).

"While we believe triggers to support near-term performance are lacking, Isis's unique and proprietary antisense platform is attractive for longer-term investors," wrote Schmidt, who downgraded the stock to neutral on the news.

Isis shares were down $4.30, or 25%, to $12.50. Meanwhile, Genzyme was off 94 cents, or 1.3%, to $72.40.

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