Teva Pharmaceutical Industries, OncoGenex Pharmaceuticals sign drug development deal

Teva, OncoGenex sign drug development deal

NEW YORK — Teva Pharmaceutical Industries Ltd. said Monday it will pay $60 million to OncoGenex Pharmaceuticals Inc. under terms of a new global licensing and partnership agreement covering OncoGenex’s potential cancer treatment OGX-011.

However, shares of OncoGenex tumbled on the news 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 also includes $20 million in cash and $30 million to prepay development costs.

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

“The agreement provides us with capital resources for the development of OGX-011 through completion of the Phase III clinical trials and into product commercialization,” said OncoGenex President and CEO Scott Cormack, in a statement.

OncoGenex, though, has to pay Isis Pharmaceuticals Inc., who co-discovered the drug with OncoGenex, $10 million upfront as part of the deal. Carlsbad, Calif.-based Isis said it also will receive 30 percent of OncoGenex’s milestone and other payments, and is eligible for between 5.5 percent and 7 percent of royalties on all sales of OGX-011.

Bothell, Wash.-based OncoGenex 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 tumbled $8.52, or 28.7 percent, to close at $21.13. The stock has ranged from $2.87 to $42.99 over the past year. Teva shares rose $1.65, or 3.1 percent, to close at $54.56, while shares of Isis rose 10 cents to finish regular trading at $10.04.

(This version CORRECTS Isis Pharmaceuticals’ stock price.)