Netherlands-based biotechnology company Pharming Group NV said yesterday that it has initiated the process to reduce its financial interest in its wholly-owned subsidiary DNage BV in order to reduce the cash need and fully focus on the commercialization of its lead product Rhucin (recombinant human C1 esterase inhibitor), which is currently being reviewed by the European Medicines Agency (EMEA), with a decision expected in the third quarter of this year.
As a first step of this process, the company has reached an agreement with the former shareholders of DNage from whom DNage was acquired by Pharming in 2006. Upon completion of this first step of the divestment process, Pharmingâ??s future earn-out payments due to the former DNage shareholders of up to 10 million euros ($12.4 million) will be settled by the issue of 5 million Pharming shares and a 49% stake in DNage. Pharming therefore initially keeps a majority interest of 51% in the share capital of DNage. This is expected to decrease after DNage secures new investors. Until such new financing is completed, Pharming will provide DNage with limited bridge funding. Thereafter, Pharming will discontinue the funding of DNage.
Blockbuster potential for Rhucin
Rhucin has potential in transplantation (possible Phase II studies in 2010 with direct sales possible by 2014-15) and use in cardiac surgery could be a blockbuster indication, according to analysts at Edison Investment Research, who initiated coverage of Pharming early this year (The Pharma Letter January 10).
Rhucin has follow-on indications in transplantation, antibody mediated rejection and cardiac surgery, the Edison analysts noted. Trials in transplant could start in first-half 2010, they said, but direct scientific validation is weak. Use in rejection is speculative. However, use of C1-INH to prevent cardiac reperfusion damage has clinical support and could be a $2.6 billion blockbuster
The partial spin-off of DNage fits well with Pharmingâ??s strategy to refocus its business on the commercialization of lead product Rhucin and the development of other programs related to biologicals (recombinant proteins), the Dutch firm says. The platform explored by DNage is being used to develop new approaches in the field of aging diseases and has rapidly developed to the stage where more clinical trials and other studies in humans need to be initiated.
DNage needs significant investments
These activities require significant additional investments for which specialized investors will now be identified who will share the risks and rewards by purchasing newly issued equity in DNage. The net effect of this spin-off for Pharming will be a reduced cash need going forward, while keeping partly the potential upside in DNage.
On completion of the partial spin-off, but no later than at the Annual General Meeting of Shareholders on May 27, 2010, Rein Strijker will resign from Pharmingâ??s board of management and will take up the position of chief executive and managing director of DNage.
â??Pharming is working hard on the anticipated approval of our lead product Rhucin in the European Union and the transition to a commercial phase. Our priority is the commercialization of Rhucin for acute HAE attacks and the clinical development of C1 inhibitor for the follow-on indications in the field of kidney transplantation. This refocus will provide for optimal allocation of our resources to the Rhucin/C1 franchise, with the objective of making Pharming financially sustainable on the basis of future revenues from these priority projectsâ?, said Sijmen de Vries, CEO of Pharming.
â??We do recognize the potential of the DNage technology platform but at the same time significant investments in further research and development will be required to capitalize on these opportunities. Since our goals are to bring our first product to the market this year and to become a cash-flow positive company as soon as possible, we believe that this spin-off transaction, in which we keep a vested interest in the upside of DNage, is in the best interests of Pharming and our shareholders,â? Dr de Vries added.
Pharming, Divestment, DNage, Rhucin