NPS taps the Amgen bank, trading royalties for $25m advance
This article was originally published in Scrip
NPS Pharmaceuticals renegotiated its license agreement with Amgen for Sensipar/Mimpara (cinacalcet HCI) so that it collects more cash now and repays its royalty advance later in a relatively low-cost effort to raise funds in support of commercialization of the Bedminster, New Jersey company's late-stage drug candidates.
NPS executive vice president and chief financial officer Luke Beshar said the company chose to pay a 9% premium to revise the royalty scheme rather than the likely 18-20% cost of capital it faced with a fundraising transaction in the capital markets. Proceeds will fund regulatory and commercial costs for Gattex (teduglutide) and Natpara (recombinant human parathyroid hormone).
Under the revised license agreement, the first $8 million in Sensipar royalties accumulated each quarter will stay with Amgen to repay the remaining $92 million of a $145 million royalty advance issued to NPS in August 2011. NPS will get the remaining $50 million to $60 million in annual royalties after Amgen takes its $32 million repayment each year.
NPS earned $18.6 million from Sensipar royalties in the first quarter of 2012, prior to repayment of the royalty advance, compared to $14.3 million during the same period in 2011.
Sensipar (Mimpara in Europe) is marketed to treat secondary hyperparathyroidism in patients with chronic kidney disease, hypercalcemia in patients with parathyroid carcinoma, and severe hypercalcemia in patients with hyperparathyroidism who are unable to undergo parathyroidectomy.
NPS used the Sensipar royalty advance to pay off debt that was attracting a 15.5% interest rate. Amgen charged NPS 9% interest for the royalty advance, which will be repaid by 2015 under the revised license agreement.
Also, under revised agreement reported on 2 July, Amgen will pay a one-time $25 million fee to NPS in July 2012 in exchange for the company's rights to receive royalties after 31 December 2018. NPS's US patents related to cinacalcet expire in 2018 and ex-US patents expire in 2019 and 2020.
"The benefit to us is we get $25 million today rather than wait until 2019 and 2020 to see what kind of income sales in those countries would generate to us. We now have more than adequate capital to pay for the balance of development and regulatory activities around both of our products," Mr Beshar said.
He said the one-time payment from Amgen in exchange for post-2018 royalties and the quarterly cash from cinacalcet after repaying the royalty advance will help the company achieve its goal of becoming a commercial specialty pharmaceutical company focused on orphan drugs for gastrointestinal and endocrine disorders.
NPS has a 30 September Prescription Drug User Fee Act (PDUFA) date for US FDA approval or rejection of its new drug application (NDA) for Gattex, a recombinant analogue of human glucagon-like peptide 2, in the treatment of short bowel syndrome, a condition in which patients are unable to absorb sufficient nutrients or fluids through the gastrointestinal tract due to surgical shortening of the bowel after an illness or injury (scripintelligence.com, 2 December 2011).
However, Mr Beshar said the FDA probably will postpone the PDUFA date for Gattex, because the regulator is required to notify NPS about the date that its drug will be considered by an advisory committee 55 days before the committee meeting. However, there are fewer than 55 days left before the 28 August meeting of the Gastrointestinal Drugs Advisory Committee (GDAC) and the next GDAC meeting will be in mid-October.
Mr Beshar said NPS is pleased with the progress the FDA has made in reviewing the company's Gattex NDA so far, but the agency probably will request a 90-day extension.
"Nothing has arisen that gives us cause for alarm in terms of queries," he said.
The European Medicines Agency's scientific committee, CHMP, approved Gattex, which NPS's partner Takeda will market in Europe as Revestive, on 22 June (scripintelligence.com, 25 June 2012). Nycomed holds the ex-US rights to Gattex/Revestive.
In the US, Mr Beshar said NPS anticipates a fourth quarter 2012 PDUFA date, assuming the GDAC will consider Gattex in October, which will enable a commercial launch toward the end of this year or in the first quarter of 2013.
"We are putting the final touches on the commercial and distribution strategy," he said.
The company hasn't said publicly how large its sales force will be, but since short bowel syndrome is an ultra-orphan disease with about 10,000 patients in the US, NPS will hire dozens rather than hundreds of sales representatives.
For Natpara, Mr Beshar said the company is on track to file a biologic license application (BLA) and request priority review from the FDA by the end of 2012, which would enable a commercial launch during the second half of 2013.
NPS reported at the end of June that Natpara, which could be the first FDA-approved hormone replacement therapy for adults with hypoparathyroidism, met the primary endpoint of halving patients' consumption of calcium and vitamin D supplements in a Phase III study. About 65,000 patients in the US have hypoparathyroidism.
"This truly is an unmet medical need. There is no other true therapeutic out there for this disease," Mr Beshar said.
Within 18 months, NPS could have both of its specialty therapeutics on the market, and then the company can focus on growing its orphan drug franchise by in-licensing compounds that address unmet needs in gastrointestinal and endocrine diseases, he said.
Until then, NPS appears to have a strong capital base on which to build its commercial business. The company had $137.7 million in cash and investments as of 31 March, down from $162.2 million at the end of 2011. It spent $28 million on operating expenses in the first quarter of 2012, up from $18.6 million in the first three months of 2011.
Investors gave NPS's stock a small push higher when the company announced the renegotiated license agreement with Amgen that will add cash to its balance sheet in July and on a quarterly basis going forward.
The company's stock price closed up $0.30 per share, or 3.4%, on 2 July at $8.90. Its 52-week range was $4.35 to $10.33 per share and the market cap was $767.2 million.
Jefferies equity analyst Eun Yang said in a 25 June research note that her price target for NPS stock was $13 per share, including $7 based on royalty income, $5 based on Gattex sales and $2 attributable to Netpara peak sales of $110 million per year – half of an NPS estimate of $200 million to $250 million.