Diabetes-Drug Plans Boost S.D. Firm’s Stock
Gensia Pharmaceuticals stock soared $8.25 a share in over the counter trading Wednesday as the company announced an agreement with Swiss pharmaceutical giant Sandoz to develop a novel diabetes treatment.
The shares, which closed at $67.25 on heavy volume of 746,000 shares traded, were boosted by the company’s decision to announce the Sandoz agreement Wednesday at the annual Hambrecht & Quist Life Sciences Conference in San Francisco, a meeting attended by top stock portfolio managers and biomedical industry stock analysts.
The companies signed a four-year agreement to develop a drug to treat adult onset diabetes, a disorder that affects 10 million Americans. The drug to be developed would use a new approach, one that would inhibit the production of an enzyme in the liver that stimulates the overproduction of glucose in diabetics.
The agreement could be worth $22 million or more to Gensia in research and other payments if a drug is developed. Gensia will be responsible for basic research, and Sandoz will take care of preclinical pharmacology, clinical development, regulatory filings, manufacturing and marketing of any compounds licensed for development.
Sandoz will have exclusive worldwide rights to the diabetes drugs developed during the agreement. Gensia would have an option to co-promote in North America any diabetes drugs developed under the agreement. Gensia would receive royalty payments on sales of drugs elsewhere in the world.
Gensia Chief Financial Officer Martha Hough declined to speculate on the market for such a drug but said that, given that 10 million Americans suffer from the disease, formally known as Type II diabetes mellitus, the potential dollar value could “involve some very big numbers.”
Hough said Gensia will hire more research personnel to work on the drug. The fast-growing company has seen its payroll double over the last year to 280 employees.
Gensia is in the final stages of clinical trials of its drug Arasine that, if successful, may limit cardiovascular damage suffered by coronary bypass patients.
Pending a successful regulatory review, the company is hoping to introduce the drug in 1993. Prospects for the drug have helped lift Gensia shares from as low as $9.375 at the end of 1990 to their current level.
The Sandoz deal is only Gensia’s second with an outside firm. In 1990, it signed an agreement with Marion Merrell Dow to develop oral forms of Arasine.
Marion Merrell Dow also has acquired 12% of Gensia shares. The Sandoz deal announced Wednesday does not include a stock purchase.
