September 2, 2007 / 3:25 PM / 10 years ago

Investor R.J. Kirk polishes Clinical Data for deals

BOSTON, Sept 2 (Reuters) - Randal J. Kirk, an investor who engineered the $2.6 billion sale of New River Pharmaceuticals to Shire Plc (SHP.L) and pocketed half the proceeds along the way, is positioning himself for a windfall from another biotechnology company: Clinical Data Inc CLDA.O.

Kirk, known as R.J., is a chief executive of Third Security LLC, a private equity firm based in Radford, Virginia, whose deals include the $2.4 billion sale of biotechnology company Scios Inc. to Johnson & Johnson (JNJ.N) in 2003.

Now he is gearing up to profit from Clinical Data, a genetic testing company that will release data as early as this week from the first of two late-stage trials of its depression drug vilazodone.

Kirk, who declined to be interviewed, holds a 46 percent stake in Clinical Data, whose shares have risen 75 percent over the past year to close at $26 on Friday.

Kirk joined the company's board in 2002 and was named chairman in 2004.

Over the past few years he has been molding the company into a more valuable asset, divesting the old diagnostics businesses and acquiring companies involved in cutting-edge genetic testing and analysis.

Now, Newton, Massachusetts-based Clinical Data is ready to talk to partners, the company's chief executive said.

"R.J. Kirk has quite a bit of experience in this area," Drew Fromkin, Clinical Data's chief executive, said. "I think there will be no lack of interest, and we will be open to having these discussions."

Kirk is adept at squeezing value out of his investments.

As chief executive of New River, he took an experimental drug for attention deficit hyperactivity disorder -- Vyvanse -- and gave Britain's Shire little option, but to buy the company to protect its own ADHD drug, Adderall XR, from competition.

"R.J. Kirk has played his hand brilliantly -- from the beginning all the way to the end. This is a case study for the ages, folks," WR Hambrecht & Co. analyst Andrew Forman wrote at the time of the $2.6 billion deal in February.

Early returns, however, suggest Vyvanse is not generating sales at the speed analysts expected. The most that can be said of it so far is that it is not cannibalizing Adderall, said Dr. Harry Tracy, publisher of the monthly journal NeuroInvestment.

"Kirk is an example of an entrepreneur, who is outstanding at amplifying a story and selling it to a pharmaceuticals company for far more money than the science is actually worth," he said.

Meanwhile, Johnson & Johnson has spent millions of dollars on Scios's heart drug Natrecor, running new clinical trials after it was suspected of causing kidney problems and death. Results of a 920-patient trial earlier this year allayed those fears somewhat, but did nothing to improve confidence in the drug's efficacy.

In Clinical Data, Kirk is making a bet on the future of personalized medicine -- drugs tailored to an individual's genetic makeup.

Clinical Data acquired the rights to vilazodone from Merck KGaA (MRCG.DE) of Germany in September 2004 after it had failed several clinical trials.

The company is betting that by altering the trial design and the type of patients tested, and combining it with a genetic test that will predict which patients respond best, the results will eventually be positive.

Some experts, including Dr. Jeffrey Lieberman, chairman of the department of psychiatry at Columbia University Medical Center in New York, are skeptical that a test can be produced that can predict with any specificity which patients will respond best to vilazodone.

"It's the wave of the future but it's not ready for prime time," he said.

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