By Christopher P. Singer --
In a February 7, 2007 Wall Street Journal article entitled: "Small Firms Seek to Profit From Drug Giants' Castoffs" (subscription required), Jeanne Whalen discusses a drug development strategy that is more frequently being employed by small drug companies. In particular, smaller companies employing this strategy enter into agreements with larger companies to license the rights to drug candidate programs that have been discontinued. In the hope of finding a potential blockbuster, the smaller firm attempts to overcome the hurdles that caused the larger company to halt work on the drug. These hurdles typically involve costs associated with manufacturing the drug and/or difficulty formulating the drug.
This article presents several examples where this strategy has succeeded, as well as examples where it has failed. In particular, Ms. Whalen focuses on the story of a renin-inhibitor drug candidate that was dropped by Novartis and picked up by Dr. Alice Huxley, a Novartis scientist originally involved with the discontinued Novartis project. After Dr. Huxley learned that the project was to be shelved, she decided to leave Novartis, form her own company -- Speedel Holding AG -- and acquire the rights to the drug, now called aliskiren. Speedel Holding eventually shepherded the hypertension drug to the clinic, overcoming the problems that had influenced Novartis to drop the program. Under the terms of the original agreement, Novartis has repurchased the rights to the drug, and hopes that the drug's mechanism of action and efficacy will capture a sizeable chunk of the crowded hypertension drug market. The financial reward for Dr. Huxley: her Speedel stock holdings are estimated to be worth about $230 million.
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