OncoGenex Grabs $60M Upfront From Teva for Rights to Cancer Drug, Shares Drop Anyway
[Updated: 12:30 pm Eastern time 12/21/09, with stock reaction.] The Cinderella story of Seattle biotech in 2009 is making more news. Bothell, WA-based OncoGenex Pharmaceuticals (NASDAQ: OGXI) is announcing today it has clinched $60 million in upfront payments from Israel-based Teva Pharmaceutical for the right to co-develop an experimental prostate cancer drug that has been shown to prolong patients’ lives in a small study.
Shares of the company fell 25 percent to $22.10 at 12:14 pm Eastern on the news. While the partnership will certainly help OncoGenex develop its treatment, some investors saw an opportunity to take profits by selling on the news, or they expected better deal terms from a bigger name partner in oncology. It’s possible some didn’t like the fact that Isis Pharmaceuticals will capture some of the potentially valuable royalties on the drug.
More on that later. But today’s deal with Teva, the world’s biggest maker of generic drugs, calls for it to pay $10 million to buy stock in OncoGenex (at a 26 percent premium over Friday’s closing price), provide $20 million in upfront cash, and another $30 million prepayment on development costs for OncoGenex’s drug, OGX-011. OncoGenex is also eligible to receive $370 million in development and sales milestones, plus a percentage royalty on product sales that range from the mid-teens to mid-twenties. Teva will pay all the expenses for development and commercialization. OncoGenex will retain the option to co-promote the product in the U.S. and Canada.
The deal is another step forward in a breakout year for OncoGenex, which I described in an August feature story. OncoGenex was so obscure last year that on one of its early days as a public company, zero shares changed hands. But the company’s share price has boomed this year from a low of $2 to $29.65 on Friday based on some very impressive clinical trial results for its treatment for prostate cancer. The OncoGenex drug is genetically engineered to block RNA that gives rise to a protein called clusterin, which is thought to help tumors resist chemotherapy.
When given in combination with chemotherapy, the OncoGenex drug helped men with terminal prostate cancer live a median of 23.8 months, about 6.9 months longer than they did on chemo alone, according to data from a study of 82 men presented in May at the American Society of Clinical Oncology meeting. Side effects included fever, chills, and reduced kidney function. Teva’s group vice president of branded products, Moshe Manor, called the data “compelling” in a statement today. If the results can be duplicated in a pivotal trial, OncoGenex and Teva could offer a new treatment for a disease that kills an estimated 30,000 men in the U.S. each year.
“This is a really transformative event for us, because it takes our lead asset to the commercialization stage and provides us with financial stability,” OncoGenex CEO Scott Cormack says.
The deal provides enough cash for OncoGenex to operate for another two years without having to raise equity from Wall Street, while also building up its pipeline of other drug candidates besides OGX-011.
Cormack also noted that he picked this deal because it didn’t pigeonhole this product as solely for prostate cancer. Because of the way it is designed to work by blocking clusterin, researchers hope it will be useful against other tumor types as well. One other main reason to pick Teva was its desire to become a bigger player in brand-name cancer drugs, Cormack says. That means it’s likely that OGX-011 won’t get lost in the shuffle of a vast portfolio of internal drug candidates, Cormack says.
But first things first, OncoGenex only has about 25 employees, so it needed the money and manpower of a big partner to capitalize on the drug’s potential in its lead application—prostate cancer. The companies plan to start a pair of Phase III clinical trials in 2010 that are expected to enroll 1,100 patients combined. Both trials will enroll men whose tumors have spread after the usual chemical castration therapies stopped working. One difference is that one trial of 800 men will be getting their first round of chemotherapy, while the other 300 patients will be getting their second round.
A third study will test OGX-011′s potential in a different disease, non-small cell lung cancer, beginning in early 2011.
If OncoGenex passes the next round of trials, it could face off against some stiff competition. Seattle-based Dendreon (NASDAQ: DNDN) is vying for FDA approval of the first treatment of its kind to stimulate the immune system against cancer. Johnson & Johnson also acquired Los Angeles-based Cougar Biotechnology for $894 million this year for an experimental prostate cancer drug in the final stage of development, and San Francisco-based Medivation secured a partnership with Japan-based Astellas Pharma that could be worth as much as $655 million over time.
The standard of care at the moment is Sanofi-Aventis’ docetaxel (Taxotere), a chemotherapy that has been shown to increase survival time by a median of 2.4 months, with significant side effects. The OncoGenex clinical trials tested OGX-011 in combination with docetaxel.
[Updated: 9:52 am Eastern, 12/21/09] It turns out that OncoGenex owes a fair chunk of its new partnership dollars to Isis Pharmaceuticals, the Carlsbad, CA-based company that developed the second-generation form of antisense therapies that gave rise to OGX-011. Isis said today it will receive $10 million of the $60 million in upfront payments that are going to OncoGenex. Isis will also get 30 percent of the $370 million in development milestones that OncoGenex negotiated with Teva, and a 5.5 to 7 percent royalty on all sales of OGX-011 if it becomes a marketed product.