Pharma pair’s second act opens well

Biotech lends itself to second acts. Entrepreneurs often start again after selling an innovation to a bigger company. Step forward Jean-Paul and Martine Clozel, founders of Idorsia. This has a promising treatment for insomnia, a common complaint. The Swiss company is less than four years old but is worth more than CHF4 billion ($4.3 billion).

The Clozels — who, like BioNTech’s famous vaccine developers, are a husband-and-wife team — sold their first company Actelion for $30 billion to Johnson & Johnson in 2017. That was only after they extracted the research laboratories, the services of many employees and rights to a pipeline of drugs.

US regulators accepted their insomnia drug daridorexant for review on Wednesday. This targets a receptor for a sleep hormone. It addresses a big market. About 16m US adults are treated for insomnia. If 5% of them used daridorexant at $5 a tablet, sales might be as much as $1.5 billion a year. Competition is fierce, however.

Idorsia hopes its drug stands out because it leaves patients’ systems relatively quickly. Having fewer side effects would help differentiate it. Sleep aids often have to carry warnings — including Ambien, blamed by celebrities including Elon Musk and Roseanne Barr for bizarre episodes.

The Swiss company has a dozen other drugs in its pipeline. Idorsia would receive royalties of 20% to 35% on J&J’s hypertension drug aprocitentan, if successful. Citigroup has pencilled in 2030 sales of CHF1 billion for daridorexant and twice that for aprocitentan, risk-adjusted by 65% and 54% respectively. Discounting such cash flows results in a target price of CHF32.50 a share — about a quarter more than today’s price.

Shareholders may find themselves tapped for yet more cash. After raising CHF865 million last year, the business is estimated to have enough for 18 months. It may need at least CHF1.1 billion more to develop the pipeline. Those who profited from the Actelion sale might hope for a second lucrative exit. But the founders have ambitions to build, rather than sell. Investors should be prepared for the long haul.

Financial Times