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Savient Pharmaceuticals' Krystexxa Approved for Gout

Savient Pharmaceuticals Inc., an unprofitable biotechnology company that is seeking buyers, won U.S. approval for a gout drug that analysts estimate may generate almost $1 billion a year.

The Food and Drug Administration cleared the product, called Krystexxa, the agency said today in a statement. Gout is a common type of arthritis in which deposits of uric acid build up around joints, causing pain, swelling and stiffness.

Savient’s board said in May that if regulators approved Krystexxa, it planned to sell the 30-year-old East Brunswick, New Jersey-based company. Americans with chronic gout may pay tens of thousands of dollars a year for a biologic treatment that works when other drugs don’t, making Savient worth as much as $1.69 billion to companies such as Novartis AG, Amgen Inc. and Johnson & Johnson, analysts said.

“Everything is kind of on the table now and they’re just waiting for the cards to be dealt by the FDA,” said Sachin Shah, a merger arbitrage specialist at the broker-dealer Capstone Global Markets LLC, in a telephone interview. That’s going to determine what the intrinsic value of the company is.”

Savient gained $3.11, or 21 percent, to $17.87 at 7:40 p.m. New York time in extended trading on the Nasdaq Stock Market after declining 6 cents to $14.76 at the 4 p.m. close. Ten of 14 analysts surveyed by Bloomberg recommended buying shares ahead of today’s decision.

Acquisition Price

Savient may sell for $21 a share, an 42 percent premium over the most recent closing price, based on an estimate of $900 million in peak sales for Krystexxa, said Gene Mack, an analyst at Soleil Securities in New York. Eric Schmidt, of Cowen & Co., projects $600 million in peak sales and an acquisition price of $20 a share. Salveen Richter, of Collins Stewart, is looking for $700 million in drug sales and $25 per share.

An offer of $25 a share would value Savient at $1.69 billion based on the company’s 67.6 million shares outstanding as of Aug. 3.

“They’ve placed their bet,” Richter said in a telephone interview. “They need approval to move forward. The next question is how many buyers.”

Novartis, of Basel, Switzerland, would be a logical suitor because its treatment for gout flares could be packaged with Krystexxa, Mack said. Amgen, based in Thousand Oaks, California; J&J, based in New Brunswick, New Jersey; or Abbott Laboratories of Abbott Park, Illinois, may also be interested because they have rheumatology products made from biotechnology, he said.

Animal Hormone

Krystexxa, derived from an animal hormone that converts excess uric acid into a form that’s easily excreted, was developed for the tens of thousands of Americans whose gout doesn’t respond to conventional therapy. The disease is typically treated with anti-inflammatory drugs and corticosteroids.

Gout is historically known as a disease of kings because obesity, alcohol and protein-rich diets increase the risks.

“We believe that the approval of Krystexxa is a significant step toward realizing our mission of transforming the lives of the patients in the U.S. suffering with chronic gout refractory to conventional therapy, as many of them finally have a treatment that gives them hope of reversing this severely debilitating disease,” Paul Hamelin, Savient’s president, said in a statement.

The company expects the drug to be available later this year though specific timing depends on “the context of the company’s commercialization plan” and the effort to find a buyer, Savient said in its statement.

Manufacturing Concerns

Savient’s application to sell Krystexxa was denied Aug. 2, 2009, two months after an advisory panel voted 14-1 in favor of approval. The FDA cited issues at a contractor’s plant in Israel and ordered the drugmaker to return to the same manufacturing processes used during the clinical studies. Savient’s resubmission was accepted in March.

The company said in an Aug. 4 conference call that the plant fixes should address the FDA’s concerns and that another inspection wasn’t planned before the Sept. 14 deadline.

Savient’s only other drug, Oxandrin, for promoting weight gain after illness or surgery, began facing generic competition in December 2006. The brand name drug and a generic version sold by Savient accounted for about $3 million in 2009 sales. The company hasn’t reported a profit since the third quarter of 2006, according to data compiled by Bloomberg.

To contact the reporter on this story: Catherine Larkin in Washington at clarkin4@bloomberg.net

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