Embrex-Wyeth feud proves costly

DURHAM - A failed partnership between Durham's Embrex and drug giant Wyeth is hindering Embrex operations in Europe, the Middle East and Africa.

Embrex contends that the stalled agreement with Wyeth's Fort Dodge animal vaccine unit may end up costing it more than $9 million in expected revenue. Some say the feud also threatens to tarnish Embrex's reputation.

Wyeth answered Embrex's 2002 deceptive trade allegations against it with claims of its own. Wyeth alleges that Embrex was unable to supply safe, effective antibody for Fort Dodge vaccine production in what were supposed to be lucrative overseas markets.

In a 30-page filing with the U.S. District Court in Raleigh, Wyeth says thousands of chickens died in Spain after the vaccine at issue - Bursamune - failed to perform as promised. In the Netherlands, a study using the vaccine resulted in skimpy birds, Wyeth says, prompting calls by regulatory bodies for a warning label, Wyeth says.

The large European market that Embrex forecast for its vaccine and its core product, the high-speed Inovoject vaccination machine, simply wasn't there, Wyeth argues. If it had been, Wyeth claims, Embrex had supply concerns that could have thrown a wrench into any deals. The accusations have been hovering in U.S. District Court in Raleigh for close to a year, and the case is expected to drag on for some months.

Wyeth has the deep pockets that better equip it to ride out the skirmish. The Madison, N.J., company - maker of Advil and Chap Stick as well as prescription drugs - posted net income of $1.57 billion for fourth quarter 2002 compared to Embrex's $1.4 million.

Meanwhile, Embrex is showing some signs of weakness. Revenue grew by just 1 percent from 2001 to 2002. The company reported negative cash flow of $1.29 million for first quarter of 2003 and a 21 percent drop in vaccine and product-related revenue.

Embrex, which employed 140 in Durham at last count, estimated that as of March 31 its poultry vaccination products had cornered at least 80 percent of the U.S. market, making foreign farmers key to developing new business.

Sensing the potential that the company was becoming landlocked in its marketing opportunities, Chief Executive Officer Randall Marcuson began courting partners for a European and African vaccine program shortly after he took over at Embrex in 1990.

Marcuson, who declined to be interviewed for this story, turned to his former employer, American Cyanamid. But by the time the collaboration got its legs, American Cyanamid had been acquired, and the vaccine project was handed off to Fort Dodge.

Embrex says it quickly noticed its new partner's interest fading.

The agreement over Bursamune sputtered for several years and unraveled for good by 2001, when Fort Dodge told Embrex that it would stop marketing the poultry vaccine after existing inventories were depleted and that it would halt its push for regulatory approvals, Embrex says.