Zeltia Plans Europe Drug Sales Force in Market-Share Push

Zeltia SA (ZEL), the Spanish developer of cancer drugs from sea creatures, plans to establish distribution subsidiaries in Europe to gain market share for products led by ovarian-tumor and soft-tissue sarcoma treatment Yondelis.

Zeltia, whose stock has lost 80 percent in the past five years, is setting up units in countries including Italy and Germany to gain better access for Yondelis and win licensing agreements for other drugmakers’ cancer treatments, Chairman Jose Maria Fernandez Sousa-Faro said in an interview.

The drugmaker posted its first profit since 2005 last year because of a payment from U.S. partner Johnson & Johnson under an agreement that revived a stalled regulatory approval process for Yondelis in the country. Earnings growth was held back as debt-battered governments in Spain, Italy and Portugal delayed payments to health-care suppliers such as Zeltia in a deficit- cutting move.

“As we have more units in Europe, we could sign licensing for other oncologic products so that our network doesn’t just sell Yondelis,” Fernandez Sousa-Faro said yesterday at company headquarters in Madrid. “This is going to be a magnificent year because we’ve turned around the business after suffering from many calamities last year.”

Zeltia rose 0.7 percent to 1.51 euros at the close in Madrid, valuing the company at 334.4 million euros ($440 million). That contrasts with a 0.8 percent decline today in the Madrid Stock Exchange General Index. (MADX)

Payment Delays

Zeltia is experiencing payment delays of more than 500 days from Spain’s government and exceeding 300 days from Italy. The company expects eventually to receive the 20 million euros that those two countries owe as well as another 1 million euros from Portugal, Fernandez Sousa-Faro said.

“We expect to be paid in Spain from August onward thanks to new government measures,” the chairman said. Collections in Italy will probably improve after the company’s PharmaMar cancer-research division sets up its distribution unit in that country in May. “Zeltia should report better sales and profit margins this year.”

Yondelis, based on a chemical found in sea squirts, first went on sale in 2007 to treat soft-tissue sarcoma, a cancer that develops in connective tissue. The drug is approved for sale for that form of cancer in Europe and Canada.

Marketing Obstacles

Zeltia encountered marketing obstacles for Yondelis in 2011 when the U.K.’s health-cost agency declined to recommend it for state reimbursements in ovarian cancer cases and J&J withdrew a U.S. regulatory application for the drug.

The Spanish drugmaker’s return to profit “is good, but it really needs to show a significant increase in both sales and net income,” Francisco Salvador, a Madrid-based strategist at FGA/MG Valores, said by phone today. “The lesson Zeltia should learn from the difficulties it’s experienced with Yondelis is that it needs to focus on profitable drugs.”

Fernandez Sousa-Faro, who remains Zeltia’s biggest shareholder even after he and his wife gave 2.2 million shares to each of their three daughters last month, said he’s “optimistic” about this year’s drug-development pipeline.

From September through November, Zeltia will be reporting late-stage trial results for Yondelis on soft-tissue sarcoma, interim analysis of late-stage studies of Aplidin for multiple myeloma, more results on an Alzheimer’s treatment study and “spectacular” findings on the 1183 molecule for resistant ovarian cancer to be presented at the European Society for Medical Oncology in late September, the chairman said.

‘Positive’ Study Results

“I think we can obtain positive results from all of them,” he said.

J&J (JNJ)’s Janssen unit pledged in December to pay PharmaMar $25 million under an agreement to conduct a new advanced clinical test of Yondelis on patients with ovarian cancer. The Spanish biotech company may also get as much as $85 million through 2015 if certain targets are met. New Brunswick, New Jersey-based J&J owns the marketing rights for Yondelis outside Europe and Japan.

“We expect payment very soon this year and, as regulators approve the product in many other countries, we’ll gain more from royalties,” the executive said. Sales of Yondelis in 2011 were penalized because of a lack of Caelyx, a product combined with Yondelis for ovarian cancer. “This will be solved by August, and we are already seeing sales from it,” he said.

To contact the reporters on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Paul Armstrong at parmstrong10@bloomberg.net

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