February 12, 2009 / 12:34 PM / 11 years ago

UPDATE 2-Merck to pay $130 mln to Insmed in biologics deal

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By Ransdell Pierson and Lewis Krauskopf

NEW YORK, Feb 12 (Reuters) - Merck & Co (MRK.N) will pay $130 million to acquire experimental medicines from Insmed Inc (INSM.O) as well as the smaller company’s commercial manufacturing plant as the drugmaker pushes into biotechnology.

Merck said in December that it planned to break into the business, a strategic shift marked by a major push into developing generic biotech drugs, also known as “follow-on” biologics.

Merck said on Thursday that it was acquiring Insmed’s portfolio of follow-on biologics.

Furthest along in clinical trials is INS-19, an experimental version of Neupogen, Amgen Inc’s (AMGN.O) medicine for boosting white blood cells. The anti-infective product has completed early-stage trials and is about to enter late-stage testing.

The deal also includes INS-20, a longer-acting white-blood-cell booster now in early-stage studies. If eventually approved, it would compete with Amgen’s Neulasta.

Amgen’s Neupogen and Neulasta have combined annual sales of more than $4 billion, which could be threatened after their U.S. and overseas patents lapse in coming years as INS-19, INS-20 and similar biogenerics from other drugmakers make inroads.

But for many biogenerics to reach the market, Congress and the Food and Drug Administration would first have to pass laws and adopt regulations that evaluate these drugs and allow companies to market them in the United States.

“There’s an expectation that such a (legal) pathway will be put in place in 2009 or 2010” in the United States, Insmed Chief Executive Geoffrey Allan said in an interview.

Biogenerics are further along in Europe, where regulators in September approved a biosimilar version of Neupogen developed by Israeli drugmaker Teva Pharmaceutical Industries (TEVA.TA) TEVA.O.

In December, Merck said it aimed to have at least five follow-on biologics in late stages of testing by 2012. The company on Thursday that it expected that lineup to include INS-19, INS-20 and a Merck drug now in early-stage trials that would compete with Amgen anemia treatments.

The deal also provides the company with “unique manufacturing resources and an experienced team of protein experts,” Frank Clyburn, senior vice president and general manager of Merck BioVentures, said in a statement.

Merck will acquire Insmed’s commercial manufacturing facilities in Boulder, Colorado, and plans to retain scores of Insmed employees and researchers from the plant.

Allan said proceeds from the Merck deal will put Insmed, whose cash had dwindled to $2.4 million by the end of 2008, back on a sound financial footing and allow it to focus on developing its Iplex treatment for muscular dystrophy.

It makes more financial sense for Insmed to hire other companies to manufacture its medicines, Allan said.

Merck for generations has specialized in conventional medicines, called small molecule drugs, which come in pill form and are made from combinations of synthetic chemicals.

In contrast, biotech drugs typically are complex large proteins made in human cells that are given by injection. They command far higher prices than conventional medicines.

Merck shares fell 2.7 percent to $28.93 in afternoon New York Stock Exchange trading, while Insmed jumped 62 percent to 71 cents on Nasdaq. (Reporting by Lewis Krauskopf; Editing by Derek Caney and Lisa Von Ahn)

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