Shares of Ionis Pharmaceuticals (IONS - Get Report) jumped Friday after the company and its subsidiary Akcea Therapeutics inked a collaboration pact with Novartis (NVS - Get Report) to develop and commercialize two cardiovascular drugs in a deal worth up to $1.6 billion plus royalties.
"We view Novartis as strong player in the cardiovascular arena and the deal terms announced today as favorable to Ionis/Akcea," wrote Cowen analyst Eric Schmidt in a note. Schmidt added that the collaboration "will enable Akcea/ Ionis to meaningfully accelerate their efforts into broader CV risk populations while retaining meaningful economics and reducing risk to large outcomes-oriented studies."
Ionis shares were trading at $48, up 2%. Novartis shares were changing hands at $73.55, down 0.7%.
"By partnering with Novartis, we can tap into their significant expertise and infrastructure to accelerate the development of both drugs and we can combine Novartis' global commercial reach with Akcea's lipid-focused specialty sales and patient support team," said Ionis founder, chairman and CEO Stanley Crooke on a conference call with analysts on Friday morning.
The drugs being developed, AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx, have the potential to "significantly reduce cardiovascular risk in patients suffering from high levels of lipoproteins known as Lp(a) and ApoCIII," according to a news release from Novartis.
Under the terms of the agreement, Ionis and Akcea are eligible to receive $225 million in near-term payments, including an immediate $75 million upfront option payment and a $100 million equity investment in Ionis, which translates to 1,631,435 shares at $61.30 apiece. Novartis has committed to make an additional equity investment of $50 million in the next 18 months in either Ionis at the same premium as the initial investment or in Akcea.
Carlsbad, Calif.-based Ionis and Cambridge, Mass.-based Akcea plan to conduct a Phase 2 dose-ranging study for each drug. After the successful completion of each study and before the start of the Phase 3 study, Novartis can exercise its option to license and commercialize each drug.
Upon option exercise, Novartis will pay Ionis and Akcea a $150 million license fee for each drug, start a Phase 3 study and will be responsible for development and commercialization activities. Akcea retains the right to co-commercialize any successful drug.
In addition, Ionis and Akcea can receive up to $315 million and $265 million in development and regulatory milestone payments for AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx, respectively, plus commercialization milestone payments of up to $285 million and $265 million for each drug, respectively.
Ionis and Akcea can receive tiered royalties in the mid-teens to low 20% range on net sales of each drug.