UPDATE 2-Biovail buys US drugmaker as strategy shift unfolds
(Adds details. In U.S. dollars unless noted)
By Scott Anderson
TORONTO, Sept 17 (Reuters) - Biovail Corp (BVF.TO) moved forward with its plan to shift its focus to treatments for the central nervous system on Wednesday, announcing it will buy privately held drugmaker Prestwick Pharmaceuticals.
Biovail, Canada's biggest publicly traded drugmaker, said it will pay $100 million for U.S.-based Prestwick, which holds the Canadian and U.S. rights to Xenazine, a drug used to treat chorea, an ailment associated with Huntington's disease.
Huntington's disease is a rare genetic disorder that causes memory loss, involuntary movements, and, ultimately, death. About 25,000 people in the United States are affected.
The deal also gives Biovail early-stage products for the treatment of Parkinson's disease and schizophrenia.
The chorea treatment should garner sales of about $60 million in Canada and the United States in 2009, said Maxime Paris, an analyst at CIBC World Markets in Montreal.
"This addresses a lot of points for the company and I think they are going in the right direction. This is in line with what they said they would do," Paris said. "This certainly addresses the company's declining top line."
Xenazine was approved by the U.S. Food and Drug Administration in August 2008 and was granted orphan drug status, which gives it seven years of market exclusivity.
The compound is already marketed in Canada, where it generated about $6 million in revenues last year, and is expected to be launched in the United States by the end of 2008.
Ovation Pharmaceuticals, which recently obtained the U.S. supply and marketing rights to Xenazine, will continue to market the product. Biovail's sales team will market it in Canada.
Earlier this year, Biovail unveiled plans to spend $600 million in research and development for central nervous system disorders through to 2012 in an effort to stave off the onslaught of generic drugs and a slowdown in drug approvals.
The company estimates the central nervous system market is worth $70 billion a year globally, with about $45 billion in the United States.
The strategy shift from controlled-release drugs sparked a messy battle with founder Eugene Melnyk, who attempted to replace the company's board with his own slate of directors. Shareholders voted in favor of the incumbent board in August.
"It is directly on strategy and will help to serve as a building block for future legs," Biovail Chief Executive Bill Wells told Reuters in a telephone interview from Milan, Italy. "This is exactly the type of thing we were thinking about.
Wells said the company is working on a number of other opportunities in licensing and acquisitions, but refused to elaborate on the type of deals and the timing of the transactions.
Biovail shares were down 5.2 percent at C$9.69 on the Toronto Stock Exchange on Wednesday and off 4 percent at $10.45 in New York.
Paris noted that Wednesday's swoon in Biovail stock comes on the back of a global market retreat that included a 2.9 percent drop for the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE.
"I don't know if it is 100 percent linked to the deal. It's a tough week. A lot of funds are just moving around," said Paris. "I can't really make a case that it is a really bad transaction." ($1=$1.08 Canadian) (Reporting by Scott Anderson; Editing by Peter Galloway)
