Glaxo's Three-Quarter-Billion-Dollar Gamble

Never a company to shy away from acquiring new drugs via partnerships and acquisitions, GlaxoSmithKline (NYSE: GSK  ) announced last night that it would acquire development stage drugmaker Sirtris Pharmaceuticals (Nasdaq: SIRT  ) .

The acquisition by Glaxo values Sirtris at about $720 million, or $22.50 a share, which is a whopping 84% premium to the $12.23 a share that Sirtris was trading at yesterday. What Glaxo gets in the deal is Sirtris' drugs that focus on "diseases of aging," such as its early stage diabetes and oncology drug candidate SRT501, and other sirtuin enzyme modulators that will be tested in type 2 diabetics, and potentially other indications as well.

Sirtris shareholders will get a pretty penny on their shares, considering that Sirtris has been a publicly traded drugmaker only since late May last year when it was IPOed at $10 a share. Glaxo's acquisition of Sirtris looks just like a technology buyout, considering the very early clinical and preclinical stages of Sirtris' drug candidates. For one, Sirtris' lead drug, SRT501, is only beginning phase 2a testing in type 2 diabetes.

Any pharmaceutical company takes a big chance when it spends money to develop a drug or make an acquisition, but in the past month we've seen a spate of several big pharmas -- Glaxo in particular -- taking risks and signing partnership deals or acquisitions on new and unproven drug pathways. Pfizer's (NYSE: PFE  ) deal for AVANT Immunotherapeutics' (Nasdaq: AVAN  ) cancer immunotherapy vaccine and Glaxo's recent deal to develop therapies involving microRNAs come to mind.

Are these deals for unproven drug targets signs of declining productivity with big pharmas' research and development endeavors? Or do they illustrate a need to grasp at riskier straws to make up for billions of dollars that will be lost for drugs facing generic competition? 

They could also signal that the weak dollar makes acquisitions of U.S. drugmakers by foreign-based pharmas cheaper. I don't know for sure, but after a slow start on the acquisition and partnership front in the first three months of 2008, it sure feels now as though big pharmas have been spending their cash recently.


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