GlaxoSmithKline's $720 million acquisition of the Cambridge, Mass.-based biotech Sirtris reflects an exception to, not the rule of, the U.K. drug manufacturer's deal-making strategy, according to company executives.

GSK announced the deal April 22, which will give it access to Sirtris' early-stage sirtuin technology.

Sirtris' lead candidate SRT501 is being tested in Phase IIa with and without metformin in type 2 diabetics with inadequate HbA1c control on metformin alone.

The compound also is in a Phase Ib study for a syndrome called MELAS - mitochondrial myopathy, encephalopathy, lactic acidosis, and stroke-like episodes.

Acknowledging the substantial size of the deal, GSK CEO JP Garnier noted during an April 23 first quarter earnings call that the company does not make this type of acquisition often.

"Frankly, we don't particularly choose between buying or alliances," he stated. "We like buying less, but sometimes, there is no choice. Either you are going to play - and to play, you have to buy the company - or you're not going to play."

The concept of paying a premium price for an early-stage biotech is sure to raise some eyebrows on Wall Street. The all-cash deal comes to $22.50 per share - an 84 percent premium to Sirtris' closing price the day of the announcement.

Deal Parallels Domantis Acquisition

The April 23 earnings presentation was Garnier's last at the helm of GSK; Andrew Witty will take over as CEO at the end of May (¹ Also see "GlaxoSmithKline Selects European Head Witty To Succeed Garnier As CEO" - Pink Sheet, 15 October, 2007., p. 3).

Garnier gave Witty an opportunity to outline his views on the company's acquisition strategy.

"I think this particular acquisition is very much in the same vein as the Domantis acquisition," Witty said.

GSK bought Domantis, a developer of domain antibodies, in 2006 for $454 million. Witty noted that both Sirtris and Domantis have "high-quality, broad technology platforms."

"Clearly, we're going to look at making sure that we're a portfolio of assets in the organization, and within that portfolio, we need to make sure we are paying attention to what will be the driver of significant product opportunity five, 10, 15 years from today, as well as those assets which are going to drive significant performance in the much nearer term."

"And for me, this type of acquisition plays exactly to that space," he continued. "It's an area where we believe there's tremendous opportunity, and I think in the future, we will remain very open-minded to these sorts of things."

However, Witty echoed Garnier's sentiments that GSK tends to prefer striking collaborative partnerships and licensing deals to acquiring companies outright.

[Editor's Note: For additional analysis of the Sirtris acquisition, see the ² IN VIVO Blog , a publication newly affiliated with F-D-C Reports and "The Pink Sheet."]

Sirtris leads the field in development of sirtuins, although MethylGene and Pharmion are also developing them.

SRT501 is designed to mimic the beneficial effects of calorie restriction by activating sirtuin-1, an enzyme that regulates aging. The compound is formulated with resveratrol, a phytoalexin that boosts the number of mitochondria in the body.

While still in the early stages of development, SRT501 could help augment GSK's struggling diabetes franchise, anchored by Avandia (rosaglitazone), which has seen a very bad year.

Sales of the brand - which also includes Avandamet and Avandaryl - plummeted 66 percent to £99 million ($196 million) in the U.S. and 56 percent globally to £191 million ($378.3 million) at constant exchange rates in the first quarter, the company reported.

The drop contributed to a 4 percent decline at constant exchange rates of pharmaceutical revenues to £4.79 billion ($9.5 billion).

Revenues from the type 2 diabetes drug began to decline last year following heavily publicized reports linking use of Avandia with cardiovascular events (³ Also see "Profile Of A Drug Safety Scandal: Avandia Appears Headed Down Familiar Path" - Pink Sheet, 28 May, 2007., p. 5). In November, FDA expanded a "black box" warning on the Avandia label to include data on the risk of heart attacks (⁴ Also see "Avandia Adds Black Box For Heart Attack Risk; Actos Launches Ads" - Pink Sheet, 19 November, 2007., p. 3).

GSK believes the worst is over however, and Garnier indicated that U.S. market share of Avandia has stabilized.

"We had this brutal drop in May last year, and then, of course, there was a slight erosion that was going on," he noted during the earnings call. "But for the last eight weeks or so, I think we have reached some kind of equilibrium," he said.

"It's early days before we can tell you whether this franchise will become a growth driver again. I think we had said at the beginning, at the last quarter review, that we wouldn't see anything move for at least six to nine months, and I think there is nothing new there. We are sticking to the same forecast."

Sales of the firm's biggest growth driver, long-acting beta2-adrenergic agonist Advair (fluticasone/salmeterol), were up 10 percent in the quarter to £954 million ($1.18 billion), helping to offset Avandia losses.

Garnier noted that the launch of AstraZeneca's Symbicort (budesonide/formoterol fumarate) in the U.S. had less of an impact on the brand than analysts projected. "We're not suffering from Symbicort. ... This is just not happening in the U.S. They represent less than 5 percent of our volume, and we had an uneventful quarter as far as Advair is concerned."

Advair's Proposed Expanded Indication

GSK hopes to extend the franchise with an expanded indication for obstructive pulmonary disease for Advair Diskus (fluticasone/salmeterol inhalation powder) 500/50 mcg.

The firm plans to expand the label to include a survival indication and a claim that Advair reduces exacerbations of COPD. However, FDA deemed the application "not approvable" last fall. The agency asked for head-to-head data with the lower 250/50 mcg strength. The new user fee date for the proposed indication is May 1.

If GSK gains the indication, "we will be the only medicine now with an exacerbation claim," President-U.S. Pharmaceuticals Chris Viehbacher said. "And given that other drugs are potentially going through some difficulty in this area, I think the whole opportunity in COPD is going to be even more attractive than it is."

"We've had some very good growth in that area, and we believe that this will buttress our position," he added.

FDA recently announced it will conduct a risk/benefit assessment of LABAs in adults and children at an advisory committee meeting in the fall or winter of 2008.

- Brooke McManus (b.mcmanus@elsevier.com)

GSK Gobbles Up Sirtris For $720 Million, But Still Prefers Alliances To Big Buys

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