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GPC/NeoTherapeutics: Winners and Losers

Executive Summary

Struggling for cash after its lead compound failed earlier this year, NeoTherapeutics had little choice but to out-license its Phase II cancer compound, satraplatin. Germany's GPC Biotech was ready to strike. Unlike its compatriots, GPC has the cash-and newly hired management experience-to fund and oversee the rest of satraplatin's development.

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Many biotechs, facing crisis situations in the fall of 2002, opted for deals that kept them alive but hardly offered much hope for upside. But in the coming months, boards may need to be far more realistic about their long-term prospects and consider a full range of options, including liquidation, when assessing a company's future.

GPC: A Model for the Rest of Us

Germany's GPC Biotech has taken a frugal and tortuous journey from platform to product company. As the customer base for its new-target discovery platform grew less receptive, it attempted to move its business towards products, but was prevented by its lack of management and its illiquid Neuer Markt shares. Thus it leveraged its Bristol-Myers connections to build an oncology team and create a pipeline, at the same time largely refocusing the company on in-licensing. In the meantime, rather than disbanding its discovery work, GPC is trying to reorient its entire platform towards applied uses in order to attract corporate funding and to feed its own pipeline. The result: a business model increasingly relevant to a financially troubled and largely directionless biotech industry.

GPC: A Model for the Rest of Us

Germany's GPC Biotech has taken a frugal and tortuous journey from platform to product company. As the customer base for its new-target discovery platform grew less receptive, it attempted to move its business towards products, but was prevented by its lack of management and its illiquid Neuer Markt shares. Thus it leveraged its Bristol-Myers connections to build an oncology team and create a pipeline, at the same time largely refocusing the company on in-licensing. In the meantime, rather than disbanding its discovery work, GPC is trying to reorient its entire platform towards applied uses in order to attract corporate funding and to feed its own pipeline. The result: a business model increasingly relevant to a financially troubled and largely directionless biotech industry.

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