Æterna rockets on Sanofi-Aventis deal

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As deals go it was one that could not have come any sooner for Æterna Zentaris. The inking of a $165m deal with Sanofi-Aventis to license US rights to the group’s enlarged prostate treatment may not have been the financial get-out-of-jail-free card it wanted four months ago, but it was one that investors had been hoping for.

Shares in the group rocketed up by 50% on the news, to C$1.25, which although modest looking was their highest level since February 2008. On Monday they fell back to C$1.16, still a seven-month high.

As part of the deal Æterna will receive an initial upfront payment of $30m for cetrorelix, a luteinizing hormone-releasing hormone (LHRH) antagonist, and will be eligible for a further $135m as the phase III drug moves through regulatory and financial milestones. Æterna has also secured co-promotion right for the drug in the US and is in line to get rising double-digit royalties.

Easing cash concerns

This fresh injection of money will be a welcome one to the group, which back in November reported $11m of cash on the balance sheet, leaving some asking whether it would be forced into a dilutive fundraising.

Instead, later that month, Æterna took a route that is becoming increasingly popular for smaller biotechnology companies, and sold the royalty stream to Cetrotide, its in-vitro fertilization drug, to Cowen Healthcare Royalty Partners for $52.5m.

While selling the family silver would have enabled the group to fund the phase III trials of cetrorelix, which analysts estimated would have cost $35m-$50m, what the market was looking for was a licensing deal for the product to restore faith in its longer-term survival, given the group’s high cash burn.

Big opportunity

Although the deal with Sanofi only covers the US, the market opportunity is large. The groups estimate that 20 million men in the US suffer from benign prostatic hyperplasia, the non-tumour related enlargement of the prostate, and that current treatments for the disorder generate $3bn annually in revenue.

The group is also only one of a handful of companies working on using luteinizing hormone-releasing hormone antagonists to treat the disorder as the table below shows. But Æterna is well positioned in that it has the most advanced product in development.  

LHRH Antagonists in development
Company Product Generic Name Therapeutic Subcategory Phase
Æterna Zentaris Cetrorelix cetrorelix Female sex hormones  Phase III
Spectrum Pharmaceuticals/Æterna Zentaris Ozarelix ozarelix Hormone therapies  Phase II
Shionogi NS75B (cetrorelix pamoate) cetrorelix Female sex hormones  Phase II
Æterna Zentaris Teverelix LA teverelix Hormone therapies  Phase II
Neurocrine Biosciences Elagolix (NBI-56418) elagolix Hormone therapies  Phase II
Pantarhei Bioscience RH-COH - Fertility agents  Phase II
Takeda TAK-385 - Hormone therapies  Phase I

The first late-stage trial results from Cetrorelix are expected by September. With the cash pressure now firmly off the group thanks to the Sanofi deal, those results, if they are positive, could be the trigger to start licensing talks for the drug outside of the US.

Æterna is hoping to file an NDA for the drug in 2010 and could take the decision to wait until cetrorelix is approved in the US before it strikes a European licensing deal in an effort to increase the value of a deal, a strategy that it could now afford to risk given its stronger financial position.

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