Millennium's Velcade agreement with Johnson & Johnson allows the biotech company to retain rights to the oncologic in the U.S., while requiring J&J to pick up nearly half of future worldwide development costs.

Entering into an agreement with J&J's Ortho Biotech for ex-U.S. rights to the proteasome inhibitor allows Millennium to achieve its most important goal: keeping U.S. commercialization rights to itself.

"First, and most importantly, we met a major strategic objective to retain exclusive marketing rights to all indications in the U.S.," CEO Mark Levin said on a June 30 conference call announcing the deal. "This represented an important milestone in our achieving long-term shareholder value."

Ortho Biotech will pay Millennium up to $750 mil. plus "double-digit" royalties for rights to Velcade (bortezomib) in ex-U.S. markets. Millennium retains an option to co-promote Velcade in certain European markets following approval in solid tumors.

Millennium launched Velcade in the U.S. in May without a marketing partner, and was expected to announce a partnership - which could have included U.S. rights - by the end of June. Velcade was approved for the treatment of multiple myeloma May 13 (¹ [A#00650200001], p. 3).

The deal with J&J does not preclude Millennium from later signing a U.S. partner. Millennium said it would discuss such an opportunity with J&J, but does not have right of first refusal.

Under the terms of the deal, Ortho Biotech will pay Millennium $15 mil. as an upfront payment; up to $125 mil. for sales and regulatory milestones for the multiple myeloma indication outside the U.S.; as much as $330 mil. for clinical and regulatory milestones for other solid tumor and/or hematologic cancers; and up to $65 mil. upon reaching certain sales milestones.

Ortho Biotech will be responsible for 40% of the joint development costs through 2005, and 45% of costs thereafter. Assuming approval in several tumor types, total development costs could reach $500 mil., Millennium estimates. The deal also includes rights to follow-on Velcade products.

In the EU, Millennium is responsible for multiple myeloma regulatory submissions up to approval by the European Agency for the Evaluation of Medicinal Products. At that time, Millennium will transfer the European license to Ortho Biotech for future filings.

Ortho Biotech, while not considered an oncology powerhouse, markets Eprex (erythropoetin) for cancer-related anemia and Leustat (cladribine) for hairy cell leukemia in ex-U.S. markets.

In explaining why Millennium chose J&J/Ortho Biotech, Levin told analysts he was impressed with the company's "reputation," "core values" and "commitment to entrepreneurialship." Those qualities "meant a lot to us earlier on, certainly, in the discussions, and held up" through talks with other companies over the last 18 months, he said.

In addition to J&J's $4 bil. oncology business, Levin pointed to the company's expertise in diagnostics. J&J has a "strong focus" on transcriptional profiling, personalized medicine and biomarkers. "That's going to be a key part of how we think about the future, so synergies in that area are also very important."

J&J is also "very strong" in Europe and Japan, with "well over" 300 sales reps selling oncology-related products in Europe. "It's this overall commitment, not just in the U.S., but around the world, that was a key part of our decision to move forward," Levin said.

Investors did not appear as convinced; Millennium's shares fell 11% on the news. The fall follows a steep run up, however; the company's stock price has more than doubled since the beginning of the year, as the Velcade approval heightened speculation that it could be the subject of a takeover bid. The stock has outperformed the "F-D-C" Index of NASDAQ-traded pharma stocks, which is up 34.5% since January (see chart: " ² Monthly 'F-D-C' Index of OTC Drug-Wholesaler Stocks ").

Velcade is in Phase I and Phase II trials for a number of other cancers, including chronic lymphocytic leukemia, non-Hodgkin's lymphoma, mantle cell lymphoma, and colorectal, breast, ovarian, kidney, pancreatic and non-small cell lung cancers.

Millennium Retains Velcade U.S. Rights; J&J Picks Up Half Of R&D Costs

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