Teva gains access to OncoGenex cancer drug in up to $430 deal including stake in the US firm

Israeli generics giant Teva Pharmaceutical Industries has entered into a global license and collaboration agreement with USA-based OncoGenex to develop and commercialize OGX-011, as well as an agreement to purchase shares in the company, in a deal worth up to a potential $440 million.

However, the US firm's shares plunged 36% after the news, as investors had expected something bigger. 'I think investors were disappointed because they are focusing on the relatively low upfront payment," said Rodman & Renshaw analyst Simos Simeonidis quoted by Reuters, adding that some investors were expecting the company to get acquired.

Under the terms of the collaboration and share purchase deal, Teva will provide OncoGenex with $60 million initial cash, which includes a $10 million equity investment in OncoGenex common stock at a price of $37.38 per share, a 26% premium to Friday's closing price, upfront payment of $20 million and prepayment of $30 million for OncoGenex' contribution to the development costs of OGX-011. OncoGenex will be eligible to receive up to $370 million in additional cash payments upon achievement of various milestones, including regulatory milestones and sales targets.

However, OncoGenex has to pay Isis Pharmaceuticals, which co-discovered the drug, $10 million upfront as part of the deal. Isis will also get 30% of OncoGenex' milestone and other payments, and is eligible for 5.5%-7% of royalties on all sales of OGX-011.