Corus Pharma will get a chance to finish developing its inhalable drug for cystic fibrosis after all.
The private Seattle biotech company had some grim moments in the past two years. At one point it scrapped plans for an initial public offering; at another, it looked as though it was doomed by a costly trade-secrets lawsuit.
But Wednesday a deep-pocketed suitor, Gilead Sciences, settled the lawsuit and followed through on an option it got in April to buy the company for $365 million in cash.
Gilead, based in Foster City, Calif., has become a force in biotechnology with a $28 billion market capitalization driven by its profitable drugs for AIDS and infectious diseases. Gilead said it expects the acquisition to receive clearance from federal regulators and be finalized in the third quarter of 2006.
John Milligan, Gilead's executive vice president and chief financial officer, said the company expects to retain most Corus employees, with the exception of some administrative jobs that overlap.
Gilead's plan for Seattle, Milligan said, is to establish a site for excellence in respiratory-disease drugs, built on expertise of the 95 employees at Corus.
Bruce Montgomery, the founder and chief executive of Corus, is staying with Gilead as senior vice president and head of respiratory therapeutics.
Gilead intends to finish the final-stage clinical trials of Cayston, Corus' inhaled antibiotic for cystic fibrosis, and to file an application next year to market the drug in the U.S. and Europe. By 2008, it hopes to have the drug approved for the market.
"We have been looking to expand our capabilities in a number of areas to grow, and this is one of them," Milligan said. "We couldn't be happier."
Milligan said Gilead has looked at buying Corus for months but had to tread carefully because of uncertainty over the lawsuit, brought by Chiron in 2004. What made the deal possible, Milligan said, was when Novartis bought out Chiron earlier this year, and its management was no longer as interested in carrying on the litigation. Gilead agreed to pay an undisclosed sum to settle.
Corus raised more than $145 million in its five years as a private company, but its investors can still expect to cash out big. The largest investor, JP Morgan Partners, holds 16 percent of the shares on a fully diluted basis. Other large investors are Burrill & Company (7 percent), Bill Gates' Cascade Investment (7 percent), and OrbiMed Advisers (6 percent).
Montgomery, who personally holds 3 percent of Corus' shares, sounded relieved after meeting with employees Wednesday afternoon. He said his crew will now have the resources to pursue their other ideas, beyond cystic fibrosis, that were shelved because of lack of cash at Corus.
"Gilead is one of the best companies in the world, and they want me to build a respiratory franchise, and they'll fund my drug and my team. I'm extremely excited."
Luke Timmerman: 206-515-5644 or firstname.lastname@example.org
Headquarters: Foster City, Calif.
CEO: John Martin
Market capitalization: $27.9 billion
2005 Revenue: $2 billion
2005 Profit: $814 million
What it does: Markets drugs for AIDS, hepatitis B and hepatitis C, and other infections.
Source: Company reports, Securities and Exchange Commission
CEO: Bruce Montgomery
What it does: Testing an inhalable drug for cystic fibrosis, in a final-stage clinical trial.
Capital raised to date: $145 million
Largest shareholders (before Gilead sale):
JP Morgan Partners (16 percent), Gilead Sciences (14 percent), Burrill & Company (7 percent), Cascade Investment (7 percent), OrbiMed Advisers (6 percent).