Jones Lang LaSalle
A TWO-MAN BAND
Chief execs of Alteon and HaptoGuard link their biotechs in hopes of scoring on heart drug
Thursday, May 11, 2006
BY JEFF MAY
Star-Ledger Staff
In the biotech industry, success can take years to announce itself. The same holds true for failure.
That's the dilemma facing shareholders of Alteon, a tiny Par sippany company that has gone through several cycles of rising buzz and near-bust. Which way is it headed now?
The struggling biotechnology firm looked like it was ready to give up the ghost this year after a two- decade run. After its lead drug showed no promise in a critical clinical trial last summer, the company said it was exploring "strategic options," and its auditor issued a "going concern" note -- unnerv ing for even the steeliest investor.
Management slashed payroll, halted drug development and watched while key employees drifted off to other jobs.
"For a guy who likes to build companies, it was the worst experience of my life," said Kenneth Moch, Alteon's chief executive since 1998.
But Alteon appeared to gain a new lease on life last month, when it announced a merger with Hapto guard, a private biotech based in Saddle Brook. The $8.8 million deal gives the company a new drug compound to pursue that might reduce the risk of death in diabetics who have suffered heart attacks. The catch: Alteon has run through $222 million since it was founded in 1986, and will require tens or even hundreds of millions more as it moves forward.
Is the planned merger enough of a reason to believe for investors? It's a tough selling job for Moch and his new partner, HaptoGuard Chief Executive Noah Berkowitz. The two are planning to hit the road to woo potential investors, starting with a presentation Monday at the Rodman & Renshaw health-care forum in Monaco.
"We're not a widely followed stock at this point," Moch said. "We're in the proverbial biotech doghouse."
Before the proposed Haptogu ard merger could be struck, Alteon had to wangle some concessions from the biotech powerhouse Genentech, which had made an early investment in the company and owned a huge block of preferred stock. The stock was worth more than Alteon's market capitalization, a situation that spooked other would-be investors. Genentech eventually agreed to take tens of millions of dollars in paper losses in exchange for future potential payments from Alteon and the right to negotiate a deal on HaptoGuard's product if it pans out.
Alteon shareholders will own a majority of the new company, and seat four directors on the board to HaptoGuard's three. But the chief executive of the company will be Berkowitz -- not Moch -- and a key scientific role will be filled by HaptoGuard's director of clinical development, Malcolm McNab, a former Novartis researcher. Moch, a high-profile manager who has served as head of New Jersey's biotech council, will become non-executive chairman.
Berkowitz and Moch insist the merger is not a classic "public shell" acquisition, in which a private company takes over a public one to avoid the time and expense of an initial public offering. Alteon last year hired Burrill & Co. to look into options for the company, and the investment firm came up with four biotech companies that were interested in a merger, but not in Alteon's lead drug, alagebrium, Moch said.
The fact that HaptoGuard was targeting the same treatment areas as Alteon helped swing the deal.
"If we were merging with an alu minum storm-door company, it would have been a different call," Moch said.
Berkowitz said Alteon would continue to develop alagebrium jointly with HaptoGuard's compound, BXT-51072.
"We absolutely believe that ala gebrium has a future, and a very strong one, in heart failure," Berko witz said. "That's why we were at tracted to the deal."
McNab's expertise at Novartis was in hypertension and heart failure, and he saw enough in the preclinical data from alagebrium to see it might have possibilities, Ber kowitz said. The HaptoGuard CEO, a physician and former scientist at the National Cancer Institute, said he was familiar with seeming dead-ends in drug development.
"In oncology, it's not uncom mon to have a drug fail initially but to find out that the drug works," Berkowitz said.
HaptoGuard is essentially a two-man operation, with most drug development duties contracted out. Alteon will be run in the same lean fashion, with clinical work farmed out to Israel and the Czech Republic.
Berkowitz is already working to expand the new company's drug portfolio. Earlier this week, Hapto guard announced it was licensing a number of compounds developed by Thomas Back, a University of Calgary researcher.
Still, the odds are against Al teon and most small biotechs. For every 5,000 to 10,000 drug compounds discovered, only one goes on to win marketing approval by the Food and Drug Administration, according to the industry's trade group, the Pharmaceutical Research and Marketing Association.
Jeff May covers the pharmaceuti cal industry and can be reached at jmay@starledger.com or (973) 392-4282.
© 2006 The Star Ledger
© 2006 NJ.com All Rights Reserved.
A TWO-MAN BAND
Chief execs of Alteon and HaptoGuard link their biotechs in hopes of scoring on heart drug
Thursday, May 11, 2006
BY JEFF MAY
Star-Ledger Staff
In the biotech industry, success can take years to announce itself. The same holds true for failure.
That's the dilemma facing shareholders of Alteon, a tiny Par sippany company that has gone through several cycles of rising buzz and near-bust. Which way is it headed now?
The struggling biotechnology firm looked like it was ready to give up the ghost this year after a two- decade run. After its lead drug showed no promise in a critical clinical trial last summer, the company said it was exploring "strategic options," and its auditor issued a "going concern" note -- unnerv ing for even the steeliest investor.
Management slashed payroll, halted drug development and watched while key employees drifted off to other jobs.
"For a guy who likes to build companies, it was the worst experience of my life," said Kenneth Moch, Alteon's chief executive since 1998.
But Alteon appeared to gain a new lease on life last month, when it announced a merger with Hapto guard, a private biotech based in Saddle Brook. The $8.8 million deal gives the company a new drug compound to pursue that might reduce the risk of death in diabetics who have suffered heart attacks. The catch: Alteon has run through $222 million since it was founded in 1986, and will require tens or even hundreds of millions more as it moves forward.
Is the planned merger enough of a reason to believe for investors? It's a tough selling job for Moch and his new partner, HaptoGuard Chief Executive Noah Berkowitz. The two are planning to hit the road to woo potential investors, starting with a presentation Monday at the Rodman & Renshaw health-care forum in Monaco.
"We're not a widely followed stock at this point," Moch said. "We're in the proverbial biotech doghouse."
Before the proposed Haptogu ard merger could be struck, Alteon had to wangle some concessions from the biotech powerhouse Genentech, which had made an early investment in the company and owned a huge block of preferred stock. The stock was worth more than Alteon's market capitalization, a situation that spooked other would-be investors. Genentech eventually agreed to take tens of millions of dollars in paper losses in exchange for future potential payments from Alteon and the right to negotiate a deal on HaptoGuard's product if it pans out.
Alteon shareholders will own a majority of the new company, and seat four directors on the board to HaptoGuard's three. But the chief executive of the company will be Berkowitz -- not Moch -- and a key scientific role will be filled by HaptoGuard's director of clinical development, Malcolm McNab, a former Novartis researcher. Moch, a high-profile manager who has served as head of New Jersey's biotech council, will become non-executive chairman.
Berkowitz and Moch insist the merger is not a classic "public shell" acquisition, in which a private company takes over a public one to avoid the time and expense of an initial public offering. Alteon last year hired Burrill & Co. to look into options for the company, and the investment firm came up with four biotech companies that were interested in a merger, but not in Alteon's lead drug, alagebrium, Moch said.
The fact that HaptoGuard was targeting the same treatment areas as Alteon helped swing the deal.
"If we were merging with an alu minum storm-door company, it would have been a different call," Moch said.
Berkowitz said Alteon would continue to develop alagebrium jointly with HaptoGuard's compound, BXT-51072.
"We absolutely believe that ala gebrium has a future, and a very strong one, in heart failure," Berko witz said. "That's why we were at tracted to the deal."
McNab's expertise at Novartis was in hypertension and heart failure, and he saw enough in the preclinical data from alagebrium to see it might have possibilities, Ber kowitz said. The HaptoGuard CEO, a physician and former scientist at the National Cancer Institute, said he was familiar with seeming dead-ends in drug development.
"In oncology, it's not uncom mon to have a drug fail initially but to find out that the drug works," Berkowitz said.
HaptoGuard is essentially a two-man operation, with most drug development duties contracted out. Alteon will be run in the same lean fashion, with clinical work farmed out to Israel and the Czech Republic.
Berkowitz is already working to expand the new company's drug portfolio. Earlier this week, Hapto guard announced it was licensing a number of compounds developed by Thomas Back, a University of Calgary researcher.
Still, the odds are against Al teon and most small biotechs. For every 5,000 to 10,000 drug compounds discovered, only one goes on to win marketing approval by the Food and Drug Administration, according to the industry's trade group, the Pharmaceutical Research and Marketing Association.
Jeff May covers the pharmaceuti cal industry and can be reached at jmay@starledger.com or (973) 392-4282.
© 2006 The Star Ledger
© 2006 NJ.com All Rights Reserved.
posted by Jones Lang LaSalle NJ News Blog at 2:12 PM
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