NicOx's hint of deal delay makes fundraising look likely

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NicOx quietly admitted yesterday that a highly anticipated and much flagged deal for its lead product, naproxcinod, might not emerge until next year, when regulators announce their decisions on the drug. Until now the company had made it clear that mid-2009 was very much the date in mind, an expectation widely taken on board by the investment community.

Given that the final label for the product will be crucial in determining its market potential, reluctance by partners to commit before this is known should have been anticipated. Any deal signed before hand is likely to be heavily back-end loaded. What this admission really means, however, is that a fundraising by the company in the near future is looking much more likely.

Naproxcinod, a nitric-oxide releasing version of the non-steroidal anti-inflammatory (NSAID) naproxen, was designed with improved safety in mind. Its selling point will be its non-detrimental effect on blood pressure in patients with hypertension, as established by a series of three phase III studies (All eyes on NicOx deal after final set of data is positive, December 17, 2008). Even the most cardio-benign NSAID causes blood pressure to rise in many patients, an unwanted side effect considering the typical patient populations taking the drugs.

Unless regulators agree to put the blood pressure data on to the label, which would allow this specific attribute to be promoted, naproxcinod would have little to differentiate itself from generic NSAIDs. The success of Pfizer’s $2.5bn a year Celebrex is largely down to data on its label supporting a lower risk of gastro-intestinal side effects, a success NicOx hopes to emulate.

Not backward in coming forward

NicOx plans to file naproxcinod with the FDA before the end of August, and in Europe a couple of months later. An August submission in the US would mean a decision in June at the earliest. The company’s head of investor relations told Bloomberg and Reuters yesterday that some partners have said they want to see the outcome of that process, specifically the label guidelines, before committing.

This frank admission might mean that sums on the table at this point are much lower than the company was hoping to acheive.

Until now, the group’s chief executive, Michele Garufi, has not been backward in coming forward about the significant interest shown in the product by big pharma. In January he even bullishly predicted that partnering talks could lead to takeover talks, reiterating that he was targeting a conclusion to the process by mid year.

Time is ripe

The data on naproxcinod and its market potential are certainly compelling enough to attract big pharma interest. However, there are also questions marks big enough to deter deals of the size Mr Garufi is no doubt hoping to deliver, until the situation is clearer. As well as the contents of the final label, some analysts have concerns about the robustness of the data, and even the approvability of the drug in the first place.

NicOx ended March with €85m in cash, which it predicted will last until the end of 2010. By June next year, when an FDA decision is possible, that cash pile will be severely depleted.

The negotiating arms of essentially one-product companies like NicOx weaken commensurately with their cash position (Companies still desperate for a partner, June 19, 2009). If Mr Garufi wants to risk holding out for a better deal, a fundraising will be essential. With the share price holding up at close to €10, not far off a high for the year, the time looks ripe for a cash call.

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