Randal “RJ” Kirk is building another biotech winner. The billionaire Virginian, who is chairman of Newton, MA-based pharmaceutical company Clinical Data (NASDAQ:CLDA), has been a catalyst for the firm’s new FDA approval of an antidepressant.
Kirk, a major shareholder in Clinical Data for years and chairman since 2004, has advocated for the 39-year old firm’s transformation from a diagnostics and research company to a pharmaceutical developer, according to company CEO Drew Fromkin. This strategy paid off hugely yesterday as the company’s stock surged by more than 50 percent on news that its antidepressant, vilazodone, had garnered FDA approval on January 21.
Vilazodone’s approval is among of string of successes that Kirk, an attorney by training, and his business partners have had in biotech. He was previously founder and chairman of Radford, VA-based New River Pharmaceuticals, which was sold to the Ireland-based drug company Shire for $2.6 billion in 2007. New River developed a drug for attention deficit hyperactivity disorder (ADHD) that Shire markets as Vyvanse. Forbes reported that Kirk cleared $1.2 billion from Shires’s buyout of New River. He had also made millions on the 1998 sale of a Virginia drug distribution company he co-founded called General Injectables & Vaccines.
“His ownership and involvement are clearly material,” says Robert Hazlett, a biotech analyst for BMO Capital Markets, who gives Clinical Data’s stock an “outperform” rating. “He has a longstanding presence in healthcare broadly and drug development specifically.”
Kirk controlled about 52.5 percent of Clinical Data’s common stock as of September 30, according to the company. And his personal fortune presumably shot up yesterday as the firm’s market value grew from $450 million to $750 million. FMR, the Boston-based company that owns Fidelity Investments and whose chairman is the billionaire Edward “Ned” Johnson III, is another major Clinical Data shareholder, controlling about 15 percent of its stock as of a November 10 regulatory filing.
Kirk was not available to comment for this article as of this morning.
To hear Fromkin tell it, Kirk deserves the boost he got to his net worth yesterday. Kirk pushed the company to buy New Haven, CT-based Genaissance Pharmaceuticals, which had been exploring the use of biomarkers in drug development, in 2005, Fromkin says. Vilazodone, a key asset acquired through the Genaissance buyout, came from Germany’s Merck KGaA. German Merck had stopped developing the drug—which is a selective serotonin reuptake inhibitor like paroxetine (Paxil) and citalopram (Celexa) but also targets a receptor involved in anxiety—because it did not outperform placebo in an earlier clinical trial. Yet Clinical Data’s chief medical officer, Carol Reed, later met with the FDA and learned how the drug could be advanced into late-stage clinical trials, Fromkin says. Clinical Data says that it now expects to begin U.S. sales of the antidepressant in the second fiscal quarter of this year under the brand name “Viibryd.”
Kirk also recruited Fromkin to Clinical Data, initially to consult on the company’s purchase of Genaissance. Fromkin, who joined the company in 2005, became its CEO in May 2006. Fromkin says that he met Kirk in 1996 when he was leading corporate development for Medco Health (then a unit of Merck & Co.) and Medco was interested in buying Kirk’s firm General Injectables & Vaccines. Though Medco never bought Kirk’s firm, Fromkin and Kirk kept in touch.
While Clinical Data has found multiple ways to raise cash to develop vilazodone over the years, Kirk came through as a major source of funds during the driest days for financing biotech companies in late-2008 and 2009. In September 2008, when the company was in the final stages of developing the antidepressant and financial powerhouses like Lehman Brothers were tanking, Kirk and his affiliated entities invested $25 million into Clinical Data to shore up its finances. And the company snagged $50 million in convertible debt financing from two Kirk affiliates in February 2009.
“RJ has always been there in those situations to be in lockstep with us when appropriate,” Fromkin says.
In addition to Fidelity, Fromkin says, Clinical Data has also broadened its investor base in recent years to include institutional backers such as OrbiMed Advisors, Times Square Capital Management, and Franklin Templeton Investments. The company has also sold what Fromkin calls “non-core” businesses such as its pharmacogenetic testing and biomarker unit and its genomic services group to raise cash for drug development. This strategy has also enabled the firm to make key acquisitions such as its August 2008 purchase of Charlottesville, VA-based Adenosine Therapeutics, which brought the company its late-stage molecule for use in cardiac imaging procedures, apadenoson (Stedivaze).
With the FDA’s approval of Clinical Data’s first drug, the company is apparently generating interest from potential buyers. The $12 billion annual market for depression drugs has been starved for new products, and that makes vilazodone a hot commodity.
“Not surprisingly for a company with a late-stage clinical compound in an important therapeutic category, over the last months we have entertained discussions with a number of parties,” Fromkin said in a conference call with investors yesterday. “Now with the approval of Viibryd in hand, we will move forward with our commercial launch plans to make Viibryd available to patients suffering from [major depressive disorder], we will also very much continue to explore the possibility of obtaining a change-in-control transaction that is acceptable to our board of directors and shareholders.”
This talk about a potential change in control at Clinical Data has me wondering whether the company might become Kirk’s next big successful exit.
BMO’s Hazlett says he took note of what Fromkin said as well about a “change in control.” “Given the largest shareholder of the company and his track record,” he says, “when you start to hear those words you better pay attention.”
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