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Several deals in 48 hours
A program in trouble
Amicus's lead program was struggling that summer. GSK, which owned 19.9% of the company and paid 50% of its budget, had decided it didn't want to be in rare disease after all and was on its way out. The company needed about $15 million to reach phase three data in the spring of 2014, and its stock was about two dollars a share.
The plan
The CEO took one plan to the board. Amicus would acquire the company of Hung Do, a former colleague whose Pompe disease enzyme data looked incredibly exciting, for $15 million in stock. A bridge loan from private equity investors would bring in $15 million in cash. Part of the company would be downsized again, and GSK's rights to the molecule would come back in exchange for a royalty if it worked. The pieces had to land together as one strategic repositioning, and the financing came last, late on a Sunday night.
Why cash matters
The CEO's view was that biotech companies fail for one reason: they run out of money, and this deal made sure Amicus wouldn't. When the press release went out announcing the recovered rights and the new technology, the stock rose one penny, because nobody cared. He told the team they knew what they needed to do and just had to execute.
Why must companies disclose deals so quickly?
Under US securities law, a public company cannot leak information that could move its stock. The SEC's Regulation FD, adopted in 2000, requires companies to share material news with everyone at once rather than with select investors. Companies often bundle related deals into one announcement for that reason. A material agreement generally must be reported on a Form 8-K filing within four business days.
Why do biotech companies run out of cash?
Most clinical-stage biotechs have no product revenue, so every dollar spent on trials comes from investors or partners. Trials run for years, and many of them fail, which leaves nothing to sell. A 2016 study by Joseph DiMasi and colleagues at the Tufts Center for the Study of Drug Development estimated the average cost of developing an approved drug, including the cost of failures, at about $2.6 billion in 2013 dollars.
Why do big drugmakers walk away from programs?
Large drugmakers regularly reshuffle their priorities after mergers, patent expirations, and trial disappointments. Several of them closed or scaled back neuroscience research between about 2010 and 2013, leaving partners without backers. Smaller biotechs often pick up such programs when rights are returned, usually in exchange for a royalty if the drug succeeds.
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