US deal for Pharming gives financial breathing space

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A US licensing deal over of its hereditary angioedema (HAE) therapy Rhucin will provide Pharming with some much needed breathing space. Santarus has paid $15m upfront for rights to the protein replacement therapy in North America, six weeks before the Dutch company was bracing itself for a knock on the door from creditors.

Should a €10.9m ($14m) bond be called in on October 31, Pharming can now comfortably pay in full; a big relief prompting shares in the company to jump as much as 19% today. Unfortunately, the stock is still trading close to record lows. Today’s news is clearly positive but it seems that firm progress, in terms of getting Rhucin on the market and generating sales, will be required before investors fully jump back on board.

Stronger position

Pharming is looking in a much stronger position that it was even at the beginning of the year. Not only does it now have in place both a US and European partner, in the form of Swedish Orphan Biovitrum, earlier this month another big chunk of debt was cleared (Event – With a European partner secured Pharming can focus on regulators, April 16, 2010).

On top of this European approval for Rhucin, where it will sold as Ruconest, is anticipated within weeks, so it is starting to look like the long regulatory path for this product is coming to the end in Europe.

The Santarus deal will help smooth, and fund, the pathway in the US. Pharming pockets $15m now and a further $5m when the Rhucin BLA is accepted; the company expects to file by the end of the year so this could come early in 2011.

Pharming is responsible for development costs under the HAE indication and will share the cost for further work. Santarus has also bought rights to indications in which late-stage trials are planned: antibody-mediated rejection and delayed graft function following kidney transplantation.

Breathing space

Pharming chief executive Sijmen de Vries says the Santarus deal not only helps Pharming on a basic cash level, but it also validates the Pharming approach.

“This is the second time in short succession that a partner deemed it to be a good idea to pay us a significant upfront for our asset Rhucin. It will have a bearing on further discussion with investors in the future and has implications beyond the numbers,” he says.

Creditors may not elect to call in the loan at the end of October, when a put option expires, and the bond does not mature until 2012. However, the cash injection gives the company options and breathing space to make alternative arrangements, he says.

Flexibility is exactly what Pharming needs as although Rhucin is nearing the market in Europe, in the US it could have some way to go. In particular the FDA needs to be convinced about the company's novel manufacturing technique, whereby Rhucin is derived from transgenic rabbits.

Entwined fates

Mr de Vries points to the benefits of having a smaller partner for whom the licensed product is also incredibly important, but this also carries risks. Santarus is itself in recovery mode following the unexpected loss of patent protection for its one marketed product, heartburn drug Zegerid (Santarus suffers heartburn from Zegerid patent loss, April 15, 2010).

Santarus stock climbed 4% to $2.62 in early trade today, but the shares are not far off a 15-month low of $2.20, touched at the end of August.

Santarus estimates it has enough cash to last at least until the end of 2011. With Mr de Vries not liking to count on US approval before 2012, the success of this partnership is also relying on the fate of Santarus and its ability to raise more money at some point.

Tough journey

Pharming has travelled a tough journey over the last couple of years, as it has struggled to deal with the initial rejection of Rhucin in 2007 and a €70m debt pile (Pharming’s rabbit product flops in Europe, December 14, 2007) .

Today the stock only managed a marginal rise to close at 17 cents, a little above the record low of 15 cents touched last month; the company has lost more than half its value this year despite the deals and improved funding situation. This illustrates that investors believe the journey is not close to ending, and could indeed hit pitfalls.

However, Mr de Vries believes that once the final debt situation is clearer and the product is launched in Europe, confidence should start to return.

“You can quickly lose confidence in these markets, and you have to regain it step by step,” he says.

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