First the quote, from today's press release:
. . . .Sale of rights to certain telaprevir milestone payments:
Vertex will receive approximately $35 million in cash for the sale of rights to an additional $95 million in potential future milestone payments tied only to launch of telaprevir in Europe. Vertex is not obligated to repay the approximately $35 million to the buyers if the milestone events relating to the launch of telaprevir in Europe are not achieved. . . .
Based on current projected European development and commercial timelines for telaprevir, and assuming a successful European commercial launch, Vertex expects that the milestone payments will be earned prior to April 2012. If achieved, the milestones will be paid by Janssen Pharmaceutica N.V., a Johnson & Johnson company, as part of a collaboration signed with Vertex in June 2006 for the development and commercialization of telaprevir in Europe. . . .
Now, think about, that for a minute -- some presumably very-sophisticated investors were willing to hand over $35 million today, in cash, for an event that may (or may not) occur in 2012, or later. They were willing to pay out almost 37 percent in cash, today -- or accept a little less than three-to-one odds that this horse will win, place or show -- in a European approval race.
Anyone who's been around pharma for any length of time will be able to rattle off the names of at least 20 or 30 "sure things" -- things that, unfortunately, never reached any market, of any size. So this substantial cash up-front deal is doubly-impressive. Admittedly, I had guessed at a smaller haircut, back in July, but this still is a pretty powerful -- and market-based -- vote of confidence (backgrounder, under that link), for Vertex's telaprevir.
True enough, a larger player like Schering-Plough (even if its boceprevir candidate would support such a bet) wouldn't need to offer such a casino-style structured transaction, into the capital markets (as it may mobilize cash from less costly sources than Vertex may, generally-speaking). Even so, seeing Vertex and Morgan Stanley succeed in closing this wild-deal -- had to cause a few facial twitches, this afternoon, in Kenilworth, and at least a few arched eyebrows in Whitehouse Station, tonight.
As ever, stay-tuned.