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Biotech Takeovers Highlight Industry Growth

Written By Brian Hicks

Posted April 25, 2013

OPKO Health Inc. (NYSE:OPK) has reached a deal with Prolor Biotech Inc. (NYSE:PBTH), under the terms of which OPKO will wholly purchase Prolor.

pillsThe all-stock deal would allow OPKO to expand its specialty drugs portfolio. Prolor shareholders stand to receive 0.9951 shares of OPKO’s common stock per Prolor share—roughly $7 per share—making the total deal worth $480 million, reports Reuters. Such terms are a 20 percent premium over Prolor’s closing price on Tuesday.

Reuters quotes OPKO Chief Executive Phillip Frost:

“Prolor’s drug-product candidates for growth hormone deficiency, hemophilia, obesity and diabetes … are highly valuable assets that will complement OPKO’s strategy.”

All details are likely to be wrapped up by the second half of this year.

Prolor is a biopharmaceutical company that works to develop and commercialize longer-acting proprietary versions of therapeutic proteins that have already received approval. The company’s version of hGH-CTP, a human growth hormone, has gone through four clinical trials, establishing conclusively that hGH-CTP can reduce the necessary dosing frequency of the hormone from its current practice of one shot a day to one shot a week.

hGH-CTP has received orphan drug designation here in the U.S., as well as in Europe, for adults and children with growth hormone deficiency.

Moreover, the company’s long-acting variety of human growth hormone and long-acting clotting factors (in pre-clinical development for hemophilia) rely on a proprietary CTP technology. It allows the therapeutic protein to remain active far longer than usual. CTP was identified at the Washington University in St. Louis, and Prolor holds the exclusive license for applying CTP to all proteins and peptides barring four endocrine proteins licensed to Merck.

OPKO is a global biopharma and diagnostics company that specializes in discovery, development, and commercialization of innovations in the biotech and biopharma field.

The Sacramento Bee quotes Shai Novik, Prolor’s President:

“We believe that OPKO’s track record of commitment to innovation and growth, along with its diversified portfolio of innovative therapeutic and diagnostic products, growing international presence, ongoing investments in commercial infrastructure and highly experienced management team make this combination an excellent fit for PROLOR.”

A Promising Future for Biotech

It’s obviously a good deal for both parties. Prolor has the actual pharmaceutical chops and the innovative technology to offer, while OPKO has the market power to establish an industry-leading position in the field.

This deal is just the latest in a very hot field right now. As you might know, commodities and housing markets have produced middling results of late. But the iShares Biotechnology Index Fund (NASDAQ:IBB) has been soaring. According to Forbes, $57.8 million has gone into the IBB ETF of late.

Biotech, of course, is a very speculative market. That’s because it takes an unusually long time—compared to other industries—to see any real payoffs. Plus, it entails high initial investment costs.

Years of trials follow, and then (with luck) an FDA approval, and subsequent commercialization can begin. It’s a risky business. But this is a good time for biotech.

The baby boomer generation’s aging, and medical care is a rising industry. Some 10,000 boomers retire every day and will continue doing so for another 17 years or so.

Cash is high in the pockets of investors because people aren’t exactly spending. They’re waiting for something promising to come along, and when it does, they will be willing to open the floodgates.

It’s a happy mix of circumstances, and the chances are pretty high that biotech will continue to be a very heated sector for quite some time to come. The initial startup costs will be swallowed as generations become ever more liberal when it comes to caring for their aging families.


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