Teva to Buy CoGenesys for $400 Million

Sale to Largest Generic Drug Maker a Boon for Rockville's HGS

Teva Pharmaceuticals of Israel, the largest generic-drug maker in the world, announced yesterday that it was acquiring the Rockville biotechnology company CoGenesys for $400 million.

CoGenesys is developing biological drugs to help cancer patients undergoing chemotherapy and people who suffer chronic heart failure, among other ailments. The treatments are in early trials.

The company was spun out of Human Genome Sciences of Rockville in June 2006 and is led by former HGS chief scientific officer Craig Rosen and former chief financial officer Steve Mayer.

The sale is a boon for HGS, which owns 13 percent of CoGenesys and stands to earn more than $50 million from the deal. CoGenesys secured only one round of funding, led by the Baltimore venture capital firm New Enterprise Associates.

"They have taken assets that were not going to be a priority for development by Human Genome Sciences internally and have produced substantial value from those assets as an independent company, and that's terrific," said Jerry Parrott, spokesman for HGS.

CoGenesys said being a part of Teva should help it hasten the process of bringing its treatments to market.

"I think we can move a large pipeline together quickly. We, as a smaller development organization, could move products into clinical trials rapidly, but we do not have the infrastructure to take them into" late stage, large trials, Rosen said.

Teva said its acquisition of CoGenesys would help it lay claim to the booming market for biotech drugs, which are more profitable than the generic drugs that are Teva's specialty. The market for biotech drugs was $70 billion in 2007, more than double the 2002 figure.

"In the long run, Teva is going to become a different company, a company that makes innovative medicines, not just generics," Yisca Erez, who analyzes Teva at Clal Finance Batucha in Tel Aviv, told Bloomberg.

But the ultimate goal for Teva is to apply its expertise in generic drugmaking to biotechnology.

"What doesn't exist today is access to affordable" biotech drugs, said William Marth, president and chief executive of Teva North America.

Such ambitions could have implications for U.S. policymakers.

Drug companies don't have to go through the same rigorous and expensive trials to bring a brand-name drug to market as they do with a generic. There's an assumption that the same chemicals assembled in a manufacturing plant will yield the same drug and have the same effect, just under a different brand name.

CoGenesys's treatments are created from living organisms. "You have biological systems making the drug, vs. robots," said Charles Duncan, a biotech analyst at JMP Securities.

"The manufacturer of that drug can have an impact on the safety and efficacy of the drug," he added.

European regulators have developed protocols for reviewing such issues. The United States has not.

As such, fewer than 10 companies are involved in trying to bring biotech generics to market, said Doug Long, vice president of industry relations, IMS Health. And because biotechnology is a relatively young field, the patents that have to expire before generic versions of drugs can be made could be a ways off, he said.