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Santarus (SNTS) and Pharming (PHARM) Partnership

May 18, 2011 11:04 AM ET
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pedromm's Blog
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A lot of noise is going on these days on the biotech sector. Are we entering in a new era like 2000? Or is just the bull strength working on…? At the end of the day the choices that we made as an investor will be tested.
Playing this game are two companies: Santarus (SNTS.NASD) and Pharming Group (PHARM.Euronext Amesterdan). By one side we have Pharming Group that is a European small biotech company with a market capitalization around 60 million euros, and Santarus that is a company listed in Nasdaq with a market value around195 million dollars.
Last September both companies sign an agreement in which Pharming sold the rights to Santarus to the commercialization of Rhucin in North America (United States, Canada and Mexico). The research of Rhucin started a few years, a human protein developed through Pharming´s proprietary technology for the treatment of patients with acute attacks of hereditary Angiodema (HAE), a disease that estimated at one racio of 1:30000 patients.
The highlights of the agreement between the two biopharmaceutical companies are:
  • Santarus paid 15 million dollars upfront fee;
  • Santarus will pay a 5 million milestone upon the acceptance of the Rhucin Bilogic Licençe Application (BLA) by the FDA;
  • Additional payments are payable to Pharming upon completing clinical and commercial milestones.
This new medicament have received unanimous positive opinion from the committee for Medical Products for Human Use (OTC:CHMP) in Europe by EMEA (equivalent to FDA in USA), making possible the use in 27 EU countries plus Norway, Iceland and Liechtenstein.
The introduce of Rhucin (Ruconest for Europe) has already taken place in Europe and has a potential market size, according the presentation of Pharming at UBS Global Life Sciences Conference around 110 millions euros each year, and for North America could well be 150 million dollars or more.
In the United States, at 28 December 2010, Santarus and Pharming announced the submission Of Rhucin Biologics License Application to FDA, and at 28 February 2011 both companies announced the receipt of FDA Refusal to file letter for Rhucin Biologics License Application.
At this point the most important is to understand how Santarus and Pharming will be able to answer to the refusal, because in his letter  FDA indicated that the data was not sufficiently complete to enable a critical medical review. Actually, FDA argue that Santarus and Pharming did not “provide data for a sufficient number of subjects to support the proposed dose of 50U/Kg and lacked prospective validation of the visual analog scale used in measuring the clinical effects of RHUCIN”.
In order to answer those facts at 5 of May Santarus and Pharming announced, after meeting with FDA, an amends of phase III clinical study: “increasing the number of patients from 50 to around 70 and a modification in the way which the primary endpoint will be assed. This modification eliminates the need for further validation of the visual analog scale”. 
In my opinion and after following Pharming since a few years and the measures taken for the approval in Europe, there are in fact good chances of winning the final approval from FDA. This time Pharming has a partner to go along, but the new studies will require a period of time around 12 to 18 months to be completed and for that more money is needed. In the Q2 2012 Santarus and Pharming should enter with a new BLA appeal and the final decision could arrive at the end of 2012.
At the end Rhucin has all to go forward in North America, and is already making easier the lives of those who suffer from HEA in Europe. For the investor will this partnership bring benefits and shareholder value…? Only time will tell, but for those who are planning to invest, one thing they should have for sure, Santarus has a solid core business and a handful of opportunities, for Pharming the pipeline is more reduce, but if they were capable to deal with costs each quarter until became profit the risk vs reward could be bigger.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am long in Pharming Group

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