I heard final bids were due last Friday. Anyone know what's going on and how much the bids came in for? I read an article (below) last week about the sales process falling.
The Daily Deal
Graceway Pharmaceuticals auction sputters
by Thomas ZAdvydas
Updated 02:01 PM, Jul-12-2011 ET
The running auction of Graceway Pharmaceuticals LLC may be on the verge of collapse because of a rival's superior drug, according to a source familiar with the situation.
Bristol, Tenn.-based Graceway, a private equity-backed pharmaceutical company that specializes in drugs used for skin treatment, earlier this year tapped Lazard for an auction after its lead drug, Aldara, went generic. The business has been pushing to get its next best hope, a drug called Zyclara used to treat skin conditions, to market.
Now, Graceway competitor Leo Pharma Inc. has its own compound, PEP005, close to government approval, and it looks to be more effective than Zyclara, according to the source. Thus, bidders involved in the Graceway auction now see the company as a less-promising target.
First-round bids for the target have come in at between $200 million and $250 million, but more recent offers have been closer to $100 million, according to a post July 5 on biotechnology trade website Cafe Pharma. The source said strategic acquirers have participated in the auction but declined to elaborate.
Graceway was formed with $200 million in backing from Chicago private equity firm GTCR Golder Rauner LLC in February 2006. It tapped former King Pharmaceuticals Inc. chief executive Jefferson Gregory to run the business and made a significant bolt-on when it bought the U.S., Canadian, and Latin American pharmaceutical operations of St. Paul, Minn.-based 3M Co. for $875 million in November that year.
Graceway and a GTCR spokesman didn't return calls. Lazard declined to comment.
The source said Graceway ran into problems after its lead skin cancer and wart treatment drug, Aldara, lost its patent exclusivity and generic versions of the compound became available on Feb. 25, 2010. The drug was generating more than $300 million in sales annually, about 80% of Graceway's total revenue.
"It went generic earlier than they were expecting, and so that basically just crushed the company," said the source, who added that Graceway is carrying more than $1 billion in debt.
In September 2010, Standard & Poor's Rating Services lowered Graceway's corporate credit rating to 'SD' from 'B-' after the business failed to make an Aug. 31, 2010, interest payment on a $330 million second-lien term loan.
A later note from S&P issued on April 29 said that the company will have serious liquidity pressures in September when a $30 million first-lien amortization payment comes due. "They're hardly doing any Ebitda right now, it became very clear that the debt needed to be restructured and maybe sold," the source said.
Graceway brought in Lazard as of at least April to help look at its options. GTCR remains the sole sponsor of the business.
Meanwhile, Graceway began to make a harder marketing push for Zyclara while the review was under way.
Trouble for Graceway's auction began about a month ago, when Leo Pharma released Phase 3 clinical trial results for its PEP005 compound, a chemical ingenol mebutate, at the World Congress of Dermatology in Seoul on June 6.
Zyclara and PEP005 are used to treat the same condition, actinic keratosis, which are precancerous skin lesions caused by sun exposure. The two compounds have similar safety and efficacy profiles, but PEP005 has a much shorter treatment cycle, according to data released by the conference. Patients typically use Zyclara for about six weeks, while the PEP005 treatment period is projected to be about two days. Leo Pharma's compound should be approved by the Food and Drug Administration later this year or early next year. When approved, PEP will be the new gold standard for actinic keratosis treatment, according to a statement by Mark Lebwohl, the lead medical investigator for PEP005. Lebwohl wouldn't comment for this story.
"It doesn't take a genius to figure out that this is going to take the vast majority of the [actinic keratosis] market," the source said.
The Daily Deal
Graceway Pharmaceuticals auction sputters
by Thomas ZAdvydas
Updated 02:01 PM, Jul-12-2011 ET
The running auction of Graceway Pharmaceuticals LLC may be on the verge of collapse because of a rival's superior drug, according to a source familiar with the situation.
Bristol, Tenn.-based Graceway, a private equity-backed pharmaceutical company that specializes in drugs used for skin treatment, earlier this year tapped Lazard for an auction after its lead drug, Aldara, went generic. The business has been pushing to get its next best hope, a drug called Zyclara used to treat skin conditions, to market.
Now, Graceway competitor Leo Pharma Inc. has its own compound, PEP005, close to government approval, and it looks to be more effective than Zyclara, according to the source. Thus, bidders involved in the Graceway auction now see the company as a less-promising target.
First-round bids for the target have come in at between $200 million and $250 million, but more recent offers have been closer to $100 million, according to a post July 5 on biotechnology trade website Cafe Pharma. The source said strategic acquirers have participated in the auction but declined to elaborate.
Graceway was formed with $200 million in backing from Chicago private equity firm GTCR Golder Rauner LLC in February 2006. It tapped former King Pharmaceuticals Inc. chief executive Jefferson Gregory to run the business and made a significant bolt-on when it bought the U.S., Canadian, and Latin American pharmaceutical operations of St. Paul, Minn.-based 3M Co. for $875 million in November that year.
Graceway and a GTCR spokesman didn't return calls. Lazard declined to comment.
The source said Graceway ran into problems after its lead skin cancer and wart treatment drug, Aldara, lost its patent exclusivity and generic versions of the compound became available on Feb. 25, 2010. The drug was generating more than $300 million in sales annually, about 80% of Graceway's total revenue.
"It went generic earlier than they were expecting, and so that basically just crushed the company," said the source, who added that Graceway is carrying more than $1 billion in debt.
In September 2010, Standard & Poor's Rating Services lowered Graceway's corporate credit rating to 'SD' from 'B-' after the business failed to make an Aug. 31, 2010, interest payment on a $330 million second-lien term loan.
A later note from S&P issued on April 29 said that the company will have serious liquidity pressures in September when a $30 million first-lien amortization payment comes due. "They're hardly doing any Ebitda right now, it became very clear that the debt needed to be restructured and maybe sold," the source said.
Graceway brought in Lazard as of at least April to help look at its options. GTCR remains the sole sponsor of the business.
Meanwhile, Graceway began to make a harder marketing push for Zyclara while the review was under way.
Trouble for Graceway's auction began about a month ago, when Leo Pharma released Phase 3 clinical trial results for its PEP005 compound, a chemical ingenol mebutate, at the World Congress of Dermatology in Seoul on June 6.
Zyclara and PEP005 are used to treat the same condition, actinic keratosis, which are precancerous skin lesions caused by sun exposure. The two compounds have similar safety and efficacy profiles, but PEP005 has a much shorter treatment cycle, according to data released by the conference. Patients typically use Zyclara for about six weeks, while the PEP005 treatment period is projected to be about two days. Leo Pharma's compound should be approved by the Food and Drug Administration later this year or early next year. When approved, PEP will be the new gold standard for actinic keratosis treatment, according to a statement by Mark Lebwohl, the lead medical investigator for PEP005. Lebwohl wouldn't comment for this story.
"It doesn't take a genius to figure out that this is going to take the vast majority of the [actinic keratosis] market," the source said.