There are few large companies in the wound treatment sector, and most of them expressed interest in the product of Polyheal Ltd. In the end, it was Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA) that won the exclusive commercialization agreement for the company's products, and it thus enters a new market.
Teva already owns 12% of Mediwound Ltd. , which is also a wound treatment developer, and holds the rights to market its lead product in Europe. With the current deal, Teva is expanding its activity in this area, by buying the rights to Polyheal's product, which is already approved for sale in Europe, as well.
The amount Teva will pay and the value of Mediwound in the deal also depend on the regulatory progress. So far, Mediwound has completed clinical trials and expects marketing approval in Europe in the coming months. Marketing approval for the US, at this stage, is not held by Mediwound or by Polyheal. Teva will be involved in pushing through the regulatory process in the US and conducting the required clinical trials. If there is no approval, then Teva will pay less. If there is approval, then the value of the deal will jump.
The strategic plan that Teva presented at the start of the year includes a target of $9.2 billion in sales of branded products (non-generic) by 2015. The wound treatment market is worth $9 billion annually, but Polyheal and Mediwound's products are only directed at part of the market, which is worth several hundred million dollars.
Teva's plan stresses reducing the company's dependence on its flagship branded product Copaxone for the treatment of multiple sclerosis. At the moment, Copaxone earns one third of Teva's profit. Competition is expected from orally administered treatments, whereas Copaxone is administered by injection, and from generic versions of the multiple sclerosis drug, and this highlights the importance of reducing dependence on Copaxone.
In order to reduce its dependence, Teva is preparing to expand into new markets and to launch new products. And here the Mediwound deal comes in. Incidentally, in contrast to its normal pattern of behavior Teva will hold a controlling share of the company. Usually, Teva either buys the entire company, or holds a minority stake.
The handsome exit by the shareholders of Polyheal demonstrates a simple truth. When shareholders show long term loyalty, and continue to develop a product through to the most advanced stages, they can achieve a better deal. That's a simple fact, although complicated to implement, because investors are not always in a position to be supportive. Sometimes an option to sell the company or a commercialization agreement appears at an early stage, and investors who did not know what will be in the future, go for it. In the case of Polyheal, receiving marketing approval for Europe put it on the radar screen of a number of companies and that brought about a deal.
Both Polyheal and Mediwound are Clal Biotechnology Industries Ltd. (TASE: CBI) portfolio companies.
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2010
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