Having officially decided to separate its pharmaceutical and molecular-diagnostics businesses, Myriad Genetics is eyeing new diagnostic product acquisitions and plans to infuse the resulting stand-alone drug maker with sufficient cash to help it through at least two products submissions to the US Food and Drug Administration.
At a meeting last week in New York, Myriad’s board of directors unanimously approved a plan to spin off the company’s research and drug development business from its core diagnostics business.
Myriad had been organized as two wholly owned subsidiaries: one focused on drugs and the other one diagnostics. Each subsidiary comprised its own research division.
“We will be spinning off the [drug] research division and the pharmaceutical assets into a new company that will be named Myriad Pharmaceuticals,” Myriad Genetics CEO Peter Meldrum told investors during a call announcing the split this week. “The molecular diagnostic company, the diagnostic research arm, and the remaining — now without any assets — Myriad Pharmaceutical shell remains part of Myriad Genetics.”
Adrian Hobden, president of Myriad Pharmaceuticals, suggested that the split is an effort to distance the increasing but disparate regulatory burdens of bringing a diagnostic and a pharmaceutical to market.
“As Myriad Genetics’ diagnostics business has grown in size and profitability and Myriad Pharmaceuticals has also grown and adapted to the stringent regulatory requirements of the US Food and Drug Administration and the European Medicines Agency, it has become increasingly clear both businesses will benefit from the separation into two well-capitalized, highly-focused companies,” Hobden told investors.
Myriad announced in August it planned to separate the units. At the time, Myriad Genetics Executive VP of Corporate Communications William Hockett told Pharmacogenomics Reporter that the company was “looking at alternatives because we are newly profitable and the combination of diagnostics and drug development may be less effective in this environment.”
According to Hockett, molecular diagnostic products contributed $222.9 million, or 95 percent, to the company’s total product revenues of $233.6 million in fiscal year 2008 ended June 30, with its BRACAnalysis tests accounting for the bulk of diagnostics sales. The $10 million balance generated by its pharma business came from a one-time payment related to licensing, not product sales.
“There will be no collaborative agreements or arrangements between the two organizations. Our goal is to have a clean and complete separation.”
Myriad Genetics will now become solely a molecular diagnostics company with 800 employees. It currently markets five tests: BRACAnalysis, Colaris, Colaris AP, Melaris, and TheraGuide 5-FU. Company officials during the call expressed a desire to develop new products internally, as well as acquire products, and to advance the diagnostic company’s position beyond oncology and into women’s health.
Meldrum noted that given the state of the economy and the difficulty that some firms are having garnering funding, Myriad might be able to acquire products for its diagnostics business at an “attractive price.”
Currently, the diagnostics company employs 250 sales reps selling its five tests, with 150 reps focused on oncology and 100 on women’s healthcare who target OB-GYNs, the firm said. The company plans to maintain its sales force at the current level through June 30, 2009, but in 2010 it plans to hire between 40 and 50 additional reps.
Specifically, Meldrum noted that Myriad has future plans to grow its OB-GYN sales force by an additional 150 reps as the diagnostics firm becomes more engaged in the women’s health sector.
As for Myriad Pharmaceuticals, it currently does not have any immediately marketable products in its pipeline. However, it is running clinical trials of several drug candidates, and has already submitted six investigational new drug applications to the FDA.
Among the later-stage candidates is the oncologic Azixa, which is in Phase 2 trials for non-small cell lung cancer, brain cancer, and metastatic melanoma. In Phase I study is Vivecon, an HIV drug; MPC-2130, for metastatic and blood cancers; and MPC-0920, for thrombosis. Another candidate, MPC-3100, is in pre-clinical studies for a cancer indication.
“This is a difficult environment for financing biotech companies,” Meldrum told investors. “We want to provide Myriad Pharmaceuticals with sufficient cash so they can see through the completion of their two lead programs … without having to go back to the market again.”
He did not specify the amount of cash that Myriad will be providing to launch the pharmaceutical business, which will be focused on developing drugs in the areas of cancer and infectious diseases.
For the fiscal year ending June 30, Myriad had $420 million in cash, cash equivalents, and marketable investment securities.
Myriad Genetics is not developing any drug/diagnostic combination products in its pipeline that would be materially impacted by the split, said Meldrum.
“This will be a complete separation of the two businesses. After the separation, they will be completely independent,” Meldrum said. “There will be no collaborative agreements or arrangements between the two organizations. Our goal is to have a clean and complete separation.”
Myriad Pharmaceuticals will launch with 200 employees, but will need to hire certain staff members, such as a new chief financial officer, whom the diagnostics and pharmaceutical business previously shared under the parent company.
Myriad Genetics is scheduled to report its first quarter earnings on Nov. 4.
The separation will be achieved through a tax free, pro-rata dividend distribution for Myriad Genetics shareholders during the first half of next year, the company said. Upon completion of the transaction, shareholders will receive a pro-rata number of shares in Myriad Pharmaceuticals, which will be tradable on Nasdaq.