Articles » 2006 » July / August 2006 » Serono


#3 Serono


15 bis, Chemin des Mines
CH-1211 Geneva 20
Switzerland
Tel: (41) 22 739 3000
Fax: (41) 22 731 2179
www.serono.com


Headcount 4,750  
Year Established 1987  
Biopharma Revenues $2,339  +7%
Total Revenues $2,586 +5%
Royalty Revenues $247 -12%
Net Loss -$105 n/a
R&D Budget $594 flat

Drugs Approved/Launched
Drug Indication 
gonal-f (in Japan)
 male hypogonadism
saizen adult growth hormone deficiency (AGHD)

Drugs Pending Approval
Drug Indication
rebif
 multiple sclerosis (new formulation)

Drugs in Phase IIb and Beyond
Drug Indication
clarity multiple sclerosis
phenoptin phenylketonuria
r-hGH HARS/lipodystrophy
r-interferon beta chronic hepatitis C in Asian patients
humax-cd4 T-cell lymphoma

Early Research Projects
Drug Indication
prostanoid FP pre-term labor
osteopontin    remyelinating agent
interferon beta:Fc multiple sclerosis
ptp1b inhibitor diabetes, obesity
tadekinig-alfa autoimmune diseases
ni-0401 anti-cd3 autoimmune diseases
ni-0501 autoimmune diseases
humax-tac T-cell mediated diseases
aurora kinase inhibitor oncology
fgf-18 osteoarthritis
ikk2 inhibitor oncology
hypergloycosylated FSH infertility
oxytocin pre-term labor

Top Selling Drugs
Drug Indication
Sales
(+/-%)
rebif
 multiple sclerosis
 $1,270 +16%
gonal-f infertility
 $547 -5%
saizen growth retardation $207 +14%
serostim wasting $70 -20%
novantrone
 multiple sclerosis, oncology
 $70 -17%
raptiva (EU only)
 chronic plaque psoriasis $33 n/a
  
Account for 100% of total biopharma sales, up from 99% in 2004.

PROFILE



If you can't sell, then buy! Serono spent several months looking for a company to acquire it, but gave up in January 2006. Now, rumors abound that Serono is looking to make a big acquisition. Some industry sources expected Serono to acquire one of its development partners. BusinessWeek proposed ImClone (#10 on this year's list) as a likely target, while a recent article by Danny Fortson in the Independent contends that UK-based Shire will be the key target of what he characterizes as a $10 billion acquisition drive by Serono. In April 2006, the company's shareholders voted to approve a new share issue to raise as much as $5.6 billion for this purpose.

What led Serono to try to sell itself off? Most analysts say that it's a result of competition in the multiple sclerosis field, where Serono makes most of its money with Rebif. Since oral treatments for MS are on the way, injectable Rebif could find itself squeezed. There's also the long-term possibility that a generic biologic could put pressure on the MS field. (What hath Omnitrope wrought?)

In addition, Serono doesn't exactly boast an extensive pipeline and, while the company does have marketing rights in the EU for Raptiva, it's not as lucrative as the U.S. rights owned by Genentech. The company earned $13.6 million in 1Q2006 sales of Raptiva.

One newspaper offered an alternate reason for the attempted sell-out: that chief executive officer Ernesto Bertarelli—whose family owns 62% of the company's shares—wants to cash out and pursue a defense of his 2003 America's Cup yachting victory next year.

Whatever the reasons, Serono is now on the prowl, looking for merger targets. In May 2006, the company restructured its executive board, adding a Strategic Corporate Development function, consisting of the Corporate Marketing group (responsible for global marketing strategy) and the Corporate Business Development group (responsible for acquisition and licensing strategy).

So how is Serono shaping up for 2006? Well, the company put one of its ugliest episodes behind it in December 2005, as one of its U.S. affiliates pled guilty to improper sales practices (including Medicare fraud) relating to Serostim. Serono paid $704 million in fines and liabilities, making it the third largest fraud case in the history of the pharma industry.

Serono gets approximately $250-$300 million in royalty revenues each year based on sales of Avonex (Biogen Idec), Puregon (Organon), Enbrel (Amgen/ Wyeth), Humira (Abbott). Since most of those products are growing in sales, we can assume that Serono will continue to gain significant revenue from that source.

But royalty revenues aren't enough, of course. Serono's pipeline is thin, and the company is taking the interesting step of trying to build one in short order. The company has engaged in a series of collaborations in the past year, in hopes of jump-starting an oncology pipeline.

In August 2005, Serono in-licensed HuMax-CD4, a treatment for T-cell lymphomas, from Genmab. Serono paid $20 million in cash, bought $50 million in Genmab stock, and as much as $145 million in development and commercialization milestones, in addition to royalties. The drug, which has fast track designation from the FDA, is in Phase III for cutaneous T-cell lymphomas and Phase II for the non-cutaneous variety.

In October 2005, Serono in-licensed drug candidates from Rigel Pharma's Aurora kinase inhibitor program. The key drug is R763, which was to enter the clinic in 2006. According to a Serono statement, R763 "is a highly potent, orally-available multi-Aurora kinase inhibitor that has been shown in vitro and in in vivo tumor xeno-graft models to inhibit proliferation and trigger apoptosis in several tumor cell lines including the cervix, colon, lung, pancreas and prostate." Serono paid $10 million for the license, bought $15 million in Rigel stock, and may pay as much as $125 million in milestones, before royalties.

That same month, Serono and partner CancerVax shut down Phase III trials of Canvaxin, a treatment for Stage III melanoma. The trial's monitoring board concluded that there was unlikely to be an overall survival benefit from the drug. "The Phase II results were promising, and we were thus hopeful that this product would be successful in a Phase III clinical trial in patients with Stage III melanoma," said Franck Latrille, senior executive vice president, corporate global product development of Serono.

Canvaxin failed trials for Stage IV melanoma in April 2005. That same month, the company had to discontinue Phase III trials of onercept, an anti-TNF therapy for psoriasis, after two patients were diagnosed with sepsis.

I don't think Serono's in terrible shape, but the company appears to be vulnerable, and needs to look at a new dance partner.