VentureBeat

A few months ago, I wrote about the intriguing trend toward “re-launching” biotech startups that had been recently acquired by Big Pharma or Big Biotech — minus, of course, whatever promising drug candidates had prompted the acquisition in the first place. Now an entrepreneur has taken the logic one step further, having just re-acquired a drug from the troubled biotech that bought out his previous startup three years earlier.

EKR Therapeutics, a Cedar Knolls, N.J., specialty pharma founded in 2005, just raised an undisclosed sum in debt and equity financing in order to buy several heart drugs from PDL BioPharma, an unraveling biotech that is selling off assets in a restructuring. The twist here is that PDL originally acquired one of those drugs, a high blood-pressure treatment called Cardene, when it purchased another specialty pharma called ESP Pharmaceuticals in early 2005. That company, it turns out, was co-founded by none other than the current CEO of EKR, Howard Weisman.

EKR is getting its old drug back for a song. The comany will pay PDL $85 million upfront and up to another $85 million contingent on the successful development of new Cardene formulations and commercial sales milestones. (Three years ago, by contrast, PDL paid $475 million in cash and stock for ESP Pharma.) As part of the current deal, EKR is also acquiring Retavase, a clot-busting drug, and ularitide, an experimental heart-failure drug.

PDL, which hit the wall when a promising drug hit safety problem and its CEO resigned following a dust-up with an activist investor in the company, has now sold off all its existing commercial products. According to Wachovia Capital analyst George Farmer, who spoke to BusinessWeek, PDL now has no “meaningful” assets beyond a royalty stream deriving from its early discovery of ways to make antibody-based drugs more effective, a new manufacturing plant and roughly $200 million in net cash — plus $685 million of estimated operating losses. (The company has drugs in development, but opinions vary widely as to whether they’ll ever see the light of day.)

Weisman, meanwhile, is so happy to have Cardene back that he now expects EKR’s revenues to increase “ten-fold” as a result of the deal. That’s a pretty bullish assumption, particularly given that Cardene’s patent expires next year. (The new formulations are undoubtedly intended to extend that patent lifetime, although recent court decisions limiting the patentability of “obvious” modifications may make that more difficult.) Still, it’s got to be sweet to have a chance to profit a second time from the same drug.

Now that AstraZeneca has made the bold — or impulsive — decision to snap up MedImmune for $15.6 billion in cash, one big question is whether the U.K. pharmaceutical giant has kicked Big Pharma’s appetite for biotech acquisitions into high gear.

The green-eyeshade types are generally still scratching their heads over the rich price, which amounted to a 21 percent premium over MedImmune’s close on Friday. The biotech was known primarily for Synagis, an antibody-based drug that prevents a common respiratory infection in babies, and FluMist, a so-far underperforming influenza vaccine that’s delivered via a nasal spray instead of injection. MedImmune has next-generation versions of both drugs in development, but neither seems likely to set the world on fire. The company also reportedly has more than 40 other experimental drugs in its pipeline, but of course it’s far from certain that any of them will ever even make it to market, much less become the blockbusters that AstraZeneca is presumably looking for.

In fact, odds are good that AstraZeneca fell victim to the “winner’s curse,” the well-known tendency of bidders to overpay, sometimes dramatically, in competitive auctions. The WSJ reports that at least four large companies, including Eli Lilly, had been involved in the MedImmune bidding — a classic blueprint for overheated competition. Somewhere, Carl Icahn is smiling.

So, of course, are other biotech investors, who have to be hoping that whatever fever AstraZeneca came down with continues to spread. The WSJ story notes that the deal is “sure to push up valuations for similarly sized companies,” and indeed the Amex biotechnology index bumped up almost two percent on the news. Other blogs are now rife with speculation over which companies might now be in play — the WSJ Health Blog thinks Biogen Idec, Medarex and some specialty pharma companies could be next, while over at Pharmalot, Ed Silverman tosses ImClone Systems, Xoma, PDL BioPharma and Telik into the mix.

Should the expected free-for-all materialize, it will obviously have major implications for venture investors, who are already plunging more deeply into the sector. At the same time, I’d also expect to see more blood on the floor on the pharma side, as it’s far from clear to me that buyers like AstraZeneca really understand what they’re getting into. I suspect that many biotech acquisitions by pharma don’t end well — the cultures are very different, and it’s very easy for even a substantial biotech like MedImmune to get lost inside the vast structure of a $26 billion behemoth like AstraZeneca.

That, at least, was generally the logic behind the rage for pharma-biotech partnerships, in which drug companies could trade cash for future rights to experimental drugs without all the messiness that acquisitions entail. But it seems the desperation of Big Pharma knows no bounds these days.

One additional point: Little noted in all the hoopla is the fact that the acquisition takes out the last North American maker of flu vaccines, following last year’s purchase of Chiron by Novartis and that of Canada’s ID Biomedical by GlaxoSmithKline the year before. So far, the concentration of vaccine production in the hands of European pharmas hasn’t seemed to concern U.S. regulators much. And it probably won’t, either — at least until the next avian-flu scare, that is.