Baxter to Buy Chatham Therapeutics - Analyst Blog

Baxter International Inc. BAX revealed that it would acquire Chapel Hill, NC-based gene therapy-mediated cures developer Chatham Therapeutics, LLC for an initial payment of $70 million.

BAX will acquire all of the outstanding membership interests of Chatham and it  may also require to pay additional amounts based on any development, regulatory and commercial milestones.

Following the announcement on April 2, shares of BAX rose 0.3% to close at $73.39 on the next day.

BAX already has a collaboration with Chatham Therapeutics, entered in May 2012. The collaboration was aimed at evaluating Chatham's Biological Nano Particle (BNP) platform, which is an advanced recombinant adeno-associated virus (rAAV)-based gene therapy technology.

The BNP platform was considered as a effective treatment for hemophilia B, known as BAX 335, which is currently in a Phase I/II study. It helps the patient's own liver to begin producing FIX following a single dose of the genetically engineered treatment.

Post-acquisition, BAX will gain broader access to Chatham's gene therapy platform, including the previously partnered hemophilia B FIX program, a preclinical hemophilia A (FVIII) program, and the future application to additional hemophilia treatments. It will help the company develop and commercialize treatments for hemophilia.

Baxter will continue the ongoing Phase I/II clinical trial to assess BAX 335. The trial will enroll up to 16 hemophilia B patients.

Meanwhile, Chatham will maintain its licensing and development relationship with Asklepios BioPharmaceutical, Inc. on the development of novel hemophilia therapeutic gene therapy candidates using the BNP platform. AskBio is associated with the development of its proprietary BNP platform technology for therapeutics aimed at heart, CNS, muscle, ocular and liver tissues diseases.

A few days back, BAX revealed that it will split-up its biopharmaceuticals and medical device segments into two independent companies in order to put greater management focus on the two businesses, effectively commercialize product offerings, efficiently allocate resources to high growth areas, and bring flexibility in deciding on growth and investment strategies.

BAX expects to complete splitting up the business in mid-2015. The transaction will take the form of a tax-free distribution to the company's shareholders of a new publicly traded stock in the new biopharmaceuticals company.

BAX expects to incur one-time charges due to the split up during the reporting periods preceding the separation. However, the company does not expect it to impact the financial guidance for 2014.

Currently, Baxter retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical products industry include Enzymotec Ltd. ENZY, Covidien plc COV, and St. Jude Medical Inc. STJ. Enzymotec carries a Zacks Rank #1 (Strong Buy), while both Covidien and St. Jude Medical retain a Zacks Rank #2 (Buy).