Publish date:

OncoGenex Slammed on Teva Partnership: BioBuzz

Licensing deal for prostate cancer drug disappoints investors, sending OncoGenex shares sharply lower.

BOTHELL, Wash. (

TheStreet

) --Shares of

OncoGenex Pharmaceuticals

(OGXI)

are getting a pre-Christmas spanking Monday after the company essentially gave away its experimental prostate cancer drug to

Teva Pharmaceuticals

(TEVA) - Get Report

.

In exchange for rights to OGX-011, Teva is paying OncoGenex $30 million upfront, of which $10 million is from an equity investment. But OncoGenex has to pay

Isis Pharmaceuticals

(ISIS)

$10 million, which leaves OncoGenex with only $20 million.

Teva is paying for the cost of the phase III studies and will pay OncoGenex royalties on OGX-011 sales ranging from 15% to 25%. But again, OncoGenex owes Isis a mid-single digit royalty on sales, so the former's net royalty is only going to be in the teens.

Teva is a giant in the generic drug business but has no standing whatsoever in the branded cancer drug market. What seems clear is the OncoGenex shopped around OGX-011 but couldn't find any interest amongst potential A-list partners. When the drug was put on sale at a deep discount, Teva snatched it up.

OGX-011 garnered a good deal of buzz

last spring

after OncoGenex presented promising phase II study results in prostate cancer. The stock traded as high as $40 in August on expectations of a big partnership or an outright acquisition of the company.

The disappointing terms of the Teva deal announced Monday were clearly not what investors were hoping for. OncoGenex shares are down 25% to $22.04 in recent trading.

Incyte Licenses Drug to Eli Lilly

(At 8:18 AM EST)

Incyte

(INCY) - Get Report

announced Monday that it has licensed a mid-stage rheumatoid arthritis drug to

Eli Lilly

(LLY) - Get Report

.

TheStreet Recommends

Under terms of the agreement, Lilly is paying $90 million upfront to Incyte for development and marketing rights to INCB28050, which is currently in a phase II study for rheumatoid arthritis.

Incyte will also be eligible for an additional $665 million in potential milestone payments from Lilly and double-digit royalties on the drug's global sales, if approved.

The partnership between the two companies encompasses INCB28050 and certain follow-on compounds which may be developed for other autoimmune and anti-inflammatory diseases.

As a result of this transaction, Lilly expects to incur a charge to earnings in the fourth quarter of approximately 5 cents per share. The company reconfirmed its full-year 2009 earnings guidance of $3.90 to $4.00 per share on a reported basis, or $4.30 to $4.40 per share on a pro forma basis.

INCB28050 is an oral drug that inhibits JAK1 and JAK2 -- two enzymes thought to play a role in the course of rheumatoid arthritis and other inflammatory/autoimmune diseases.

Incyte's lead JAK inhibitor, INCB18424, is in Phase III development for myelofibrosis.

Pfizer Licenses Athersys Stem-Cell Drug

(At 6:46 AM EST)

Pfizer

(PFE) - Get Report

said Monday it has licensed a stem cell therapy for inflammatory bowel disease from

Athersys

(ATHX) - Get Report

.

Athersys will received $6 million upfront from Pfizer and is eligible for another $105 million in future milestone payments. Pfizer is paying the costs to develop the stem cell therapy, known as MultiStem, for inflammatory bowel disease.

MultiStem is made from stem cells obtained from the bone marrow of healthy, adult donors.

Pfizer will pay royalties to Athersys if MultiStem is approved for sale. Athersys retains the rights to develop MultiStem in various other indications.

New Analyst Coverage for BioCryst Pharmaceuticals

Morgan Stanley initiated research coverage on

BioCryst Pharmaceuticals

(BCRX) - Get Report

Monday with an "equal weight" rating.

"We see potential for near-term upside from government peramivir orders (IV seasonal and pandemic flu drug) over the next 12 months, but have less insight into the success of the drug’s Phase III trial in flu, which is critical for long-term commercial success beyond the current pandemic. Government orders or a second H1N1 virus peak (many experts expect) could create short-term stock momentum, but sustainable upside will depend on Phase 3 seasonal flu trials (data 2011), leaving us with an equal weight rating," writes analyst Steve Harr.

Morgan Stanley was the lead investment bank on BioCryst's recent follow-on stock offering.

-- Reported by Adam Feuerstein in Boston

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

click here

to send him an email.