Posted by utopizen on June 11, 2003, at 13:29:33
Orphan Medical sells drug, cuts jobs as focus is put on Xyrem
Julie Forster, Star Tribune
Published June 11, 2003 ORPH11Orphan Medical on Tuesday sold the rights to one of its drugs for $29.5 million to raise cash it needs to further develop the potential for Xyrem, its treatment for sleep disorders.
As a result of the rights sale, Orphan is cutting 26 jobs, leaving it with about 85 total. Minnetonka-based Orphan said its business will be largely focused on Xyrem, a drug that Orphan expects will put the company in the black for the first time.
ESP Pharma Inc. bought the rights to Busulfex from Orphan. Busulfex is used as a preparatory regimen before cell transplantation in leukemia patients. The jobs being cut are related to Busulfex sales.
Xyrem is the only FDA-approved treatment for cataplexy, the sudden loss of muscle tone sometimes resulting from narcolepsy. Narcolepsy is a disorder characterized by sudden and uncontrollable, though often brief, sleep episodes.
Last month, Orphan raised $1.5 million when it sold the rights to Sucraid, a solution used as a sugar replacement for patients with an inability to properly break down and absorb table sugar.
At the end of the first quarter, Orphan had just $2.2 million in cash. "They were getting down to the point where they really did need money," said Chad Simmer, an analyst for Miller Johnson Steichen Kinnard. "The markets for financing have not been particularly good."
Orphan wants to position Xyrem as the treatment for the full range of narcolepsy symptoms and to explore the drug's potential in treating other sleep and central nervous system disorders. The money raised by the latest sale will finance two clinical trials aimed at showing that Xyrem can treat excessive daytime sleepiness, the primary condition of narcolepsy, said Tim McGrath, Orphan's chief financial officer.
"We have two trials underway right now which should be fully enrolled by end of year," he said. The company could seek broader FDA approval for the drug in 2004.
Xyrem's active ingredient, gamma hydroxybutyrate (GHB), was developed as a surgical anesthetic and gained notoriety in recent years for its abuse as a "date-rape drug" that, when combined with alcohol, can cause a victim to lose consciousness.
An estimated 140,000 people in the United States have narcolepsy; 60 to 90 percent of these individuals suffer from cataplexy. Orphan estimates that the total narcolepsy market for Xyrem exceeds $600 million.
Before the Busulfex sale, analysts had estimated that the company would become profitable late next year or in 2005. Now, Orphan's McGrath said it's more likely that it will be "mid-2005 that we approach break-even."
The company's revenue forecast for 2003 has been adjusted to $18 million to $25 million, compared with the previous estimate of $20 million to $23 million, to reflect the loss of Busulfex sales. Simmer expects Xyrem to generate $5 million in sales this year, $22 million in 2004 and $46 million in 2005.
Orphan said it expects the sale proceeds and international licensing of Xyrem to give it enough cash to fund operations through at least 2004.
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