Teva, OncoGenex sign drug development deal

AP News
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Posted: Dec 21, 2009 12:13 PM

Teva Pharmaceutical Industries Ltd. said Monday it entered a global licensing and collaboration agreement for OncoGenex Pharmaceuticals Inc.'s potential cancer treatment OGX-011 for $60 million, including an equity investment.

However, shares of OncoGenex tumbled following the announcement as investors scrutinized the terms and payment structure of the agreement.

Under the deal, OncoGenex will receive $60 million up front, including a $10 million equity investment valuing its stock at $37.38 per share, which represents a 26 percent premium to its closing price of $29.65 on Friday. The upfront payment includes $20 million in cash and $30 million in a prepayment for development costs.

OncoGenex will be eligible to receive up to $370 million in milestone and other payments, along with royalties.

However, OncoGenex has to pay its partner, Isis Pharmaceuticals Inc., $10 million upfront as part of the deal. Isis, based in Carlsbad, Calif., co-discovered OGX-011. Isis said it will also receive 30 percent of the milestone and other payments up to $370 million, and is also eligible for between 5.5 percent and 7 percent of royalties on all sales of OGX-011.

OncoGenex, based in Bothell, Wash., retains an option to co-promote OGX-011 in the U.S. and Canada. The drug candidate is expected to move into late-stage development as a potential prostate and lung cancer treatment in 2010 and 2011. The drug is expected to be used an additional therapy to enhance the effectiveness of chemotherapy.

OncoGenex shares plunged $7.62, or 25.7 percent, to $22.03 in midday trading. The stock has ranged from $2.87 to $42.99 over the past year.

Teva shares rose $1.37, or 2.6 percent, to $54.28. Shares of Isis rose 85 cents to a new year high of $50.45.