Myriad's Flurizan Deal Is a Hedged Bet
Myriad Genetics
(MYGN) - Get Report
surprised investors early Thursday selling outside-the-U.S. rights to its Alzheimer's drug Flurizan -- mere weeks before late-stage data will offer more clues to the drug's approvability.
Danish company Lundbeck will pay Myriad $100 million upfront and up to $250 million in milestones as well as future royalties for European rights to the drug, which is in late-stage development. Midstage data were mixed, and top-line data from a pivotal late-stage study on the drug -- a strong indicator of its potential -- is expected in the next two months.
The timing of the deal raises the question of how much information, if any, Lundbeck has on the upcoming data. JMP analyst Charles Duncan said: "....while just speculation on our part as we do not believe Myriad has provided Lundbeck with any more clinical information than what it has disseminated to the public, this deal raises the possibility that Lundbeck may have anecdotal information about how Flurizan is working in the trials from conducting a survey of its own customers."
Stanford analyst Han Li, who reiterated a hold rating on the stock, agrees it's unlikely Lundbeck has seen the actual data. But he says the structure of the deal, potentially worth as much as $350 million, provides a hedge for both companies.
"For Lundbeck it buys a $100M call option on European rights ahead of phase III data release and can walk away if the trial failed," Li writes. "For Myriad, it secures a partner and $100M upfront payment regardless of the phase III outcome."
If the data in June/July are mixed or the drug "kind of" works, investors will have to make their bets while waiting for data due around the end of the year from an international study, JMP's Duncan says.
He says that should Flurizan get approved in Europe, either sooner or later, Lundbeck's infrastructure -- with the largest central nervous system sales force in the EU -- maximizes its sales potential there. He has an outperform rating on the stock and a $75 price target.
In the U.S., Myriad has indicated it intends to have a dual sales force, internally marketing the drug to specialists and partnering with a major pharmaceutical company to market it to primary care physicians. In Asia it will seek a deal similar to this one with Lundbeck.
If successfully developed, the drug could have a multibillion-dollar market potential making it attractive to an array of Big Pharma companies. But Stanford's Li notes a possible negative from Thursday's hedging deal: "The European partnership with Lundbeck may potentially reduce the economics for deals with other partners."
Myriad, a Salt Lake City, Utah-based biotechnology company, isn't alone in its pursuit to target Alzheimer's. Competitor
Elan
(ELN)
and partner
Wyeth
(WYE)
also have an Alzheimer's treatment, bapineuzumab, in pivotal late-stage studies.
Under the agreement, Myriad will recognize the $100 million upfront payment over the life of the agreement. The payment will trigger a sublicense royalty payment to Encore Pharmaceuticals, which will be recognized this year, and is expected to materially increase Myriad's research expenses and net loss in the fourth quarter of 2008, according to the company.
Shares of the Myriad rose $2.14, or 4.7%, to $48.21 in recent trading Thursday.