In a bid to cut costs AstraZeneca is spinning out its efforts to find new drugs for gastrointestinal (GI) disorders to a new company called Albireo. Part of the decision reflects AztraZeneca’s recent problems with its drug, Nexium, an ulcer treatment, which has been declining in profit and its decision to direct its energies on respiratory, cancer and infectious diseases.
Based in Gothenburg, Sweden, Albireo is inheriting one clinical and a number of pre-clinical GI programmes and key researchers in the field from AstraZeneca. The company is to be funded by a syndicate of growth capital firms, led by Nomura Phase4 Ventures, together with TVM Capital and Scottish Widows Investment Partnerships. So far Albireo has raised $27 million.
The creation of a spin out by a large pharmaceutical company is not new. In 2000 Roche established the biotechnology company Basilea Pharmaceutical to develop drugs for infectious diseases and dermatology, an area Roche had developed for the previous 15 years. One of the reasons for spinning out Basilea was to allow Roche to focus its efforts on its core areas of research and development. Basilea inherited Roche’s know-how, intellectual property and compound library in antibiotics, antifungals and dermatology.
Spinouts can be an attractive means of cutting down on costs while creating a new avenue for partnerships and filling dwindling drug pipelines. Both Roche and AstraZeneca retain minority equity interests in their spin out companies and have the option of licensing their products. This could be an important source of revenue and drugs in the future. Today Basilea has two drug candidates in the pre-registration phase, one in clinical phase III and a number of promising early-stage programmes. Two of Basilea’s drugs have received fast track designations from the U.S. Food and Drug Administration.
Pfizer has announced that it is in talks to become a strategic investor in Imaginatik, a web-based software company. Imaginatik is listed on Aim, the London small companies index and produces collaborative software designed to allow ideas and insights from employees in large organisations to be shared collaboratively. Imaginatik was founded in 1994.The company had revenues of just $1.15 million in the six months to September 2007 down from ?1.27 million in the same period in 2006. The company had 43 annual licence customers in September paying an average licence fee of ?53,500 down from $72,500 in 2006 from 35 customers. The company produced a loss of $469,000 in the six months to September 2007 compared to a profit of $155,000 in 2006. Not exactly Google type of numbers.
Web-based collaborative software itself has been around since the days of Lotus Notes and there are hundreds of packages available ranging from the software used to run Wikipedia that can be used free of charge to hundreds of other specialised packages designed to match particular market niches.
The deal has left observers wondering why one of the largest pharmaceutical companies in the world whose expertise is in drug development is investing in a tiny software company. It is clearly not revenues, revenue growth or profits. Imaginatik has made gloomy trading statements in recent days and the simple fact of the matter is that web based companies like Imaginatik either scale up very rapidly or fade away. At the moment Imaginatik seems more likely to follow the latter track.
Pfizer went so far as to nominate Imaginatik for a technology pioneer award at the World Economic Forum at Davos earlier this year. Why Pfizer should single out this particular web software supplier and not other software suppliers to Pfizer or indeed one of its many innovative biotechnology partners is a complete mystery to us.
One industry observer commented ‘The only reason I can see that Pfizer would want to make this type of investment is if they were offered a massive discount on the licence fee to make it worth their while lending their name to the Imaginatik’s efforts to spin a company with declining revenues and a declining income per customer into a success story. Either way, I don’t know what partners or potential partners will make of the deal.’
It could be that Pfizer have found something compelling in a company selling a faily basic web-based collaboration package, however at this point we remain to be convinced.