Saturday, March 27, 2010

The Dénouement Of A Now-Dead Deal: A GTx-Merck Close-Out Sale

Dénouement Alert: GTx had to strike a hard-luck (highly dilutive) deal, once its collaboration with Merck came to an end, according to InVivo Blog's "Deals of the Week" column:

. . . .In need of non-dilutive financing after its selective androgen receptor modulator deal with Merck came to an end three weeks ago, GTx this week revised an existing collaboration with Ipsen. It calls for Ipsen to pay GTx $58 million pegged to Phase III trial milestones for toremifene, which is being tested to reduce fractures in prostate cancer patients receiving androgen deprivation therapy. The money will certainly come in handy, but GTx is paying a heavy price. The Memphis firm will forgo some longer-term payments that Ipsen would have owed had toremifene suceeded, as well as right of first negotiation to the Phase II prostate cancer drug, GTx-758. . . .

[T]oremifene in November garnered a complete response letter from FDA that requested a second Phase III trial to demonstrate efficacy. With just $49 million in the bank and no more money coming from Merck, GTx calculated near-term cash was more important than downstream financial rewards. It's yet another example of the new math being practiced by cash-strapped biotechs. . . .

Indeed. A few weeks back, the then-dying deal was disclosed in a highly-irregular fashion, given its impact on GTx's fortunes (GTx being geometrically smaller than Merck -- yet it appeared, in almost-footnote fashion, in Merck's annual disclosures, long before GTx officially admitted what had happened). Some background on the story here; follow-up story here.

To be clear, this latest Ipsen deal is dilutive to GTx's "intellectual property portfolio equity", not its common share equity, directly. But it will likely be felt there, just the same. Tough market conditions, indeed.

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