A licensing and development agreement with Roche (Basel, Switzerland) and its subsidiary, Genentech (South San Francisco, California) could net Surmodics (Eden Prairie, Minnesota) up to $200 million in fees and milestone payments.
The company reported the deal, which would give Roche and Genentech the exclusive license to use Surmodic's proprietary biodegradable microparticles drug delivery system to develop and commercialize a sustained drug delivery formulation of Lucentis, on yesterday.
Under the terms of the agreement, SurModics will receive an up-front licensing fee of $3.5 million. In addition, SurModics could be eligible to receive up to nearly $200 million in fees and milestone payments in the event of the successful development and commercialization of multiple products.
"Genentech will lead and fund the future development activities for Lucentis Microparticle formulate products," Bruce Barclay, president/CEO of Surmodics said during an investors conference call Tuesday.
Roche and Genentech will pay SurModics for its development services and have the right to obtain manufacturing services from SurModics.
"This agreement represents yet another major advancement toward realizing our strategic vision of developing technologies that address important clinical needs in the large and growing ophthalmology market," Barclay said.
He added "We believe that partnering with Genentech, among the world's largest and most prominent biotechnology companies and an established market leader in ophthalmology, serves to validate our critically enabling technologies. The agreement, which includes Lucentis and potentially other products, addresses a wide range of ophthalmic diseases and leverages our expertise and technology platforms in ophthalmology, employ our proprietary biodegradable microparticles drug delivery system from SurModics Pharmaceuticals, and will utilize our new world-class cGMP manufacturing facility in Birmingham, Alabama."
SurModics said that it would receive undisclosed royalties on product sales.
Barclay added, "This agreement has the opportunity to provide both near- and long-term value to SurModics' shareholders. The combination of the up-front payment, R&D and manufacturing fees and contingent milestone payments underscore the unique advantages and power of our business model. The prospect of developing a sustained delivery formulation for a known, approved and highly successful drug in Lucentis, is a tremendous opportunity for SurModics."
Although the company played coy when it came to any actual figures, Surmodics executives did say potential moneys could top its previous agreement with Johnson & Johnson (J&J; New Brunswick, New Jersey).
SurModic's Bravo Drug Delivery Polymer Matrix is a critical component of the Cypher sirolimus-eluting coronary stent from the Cordis (Miami Lakes, Florida) unit of J&J, and has been implanted in millions of patients (Medical Device Daily, March 31, 2005).
"It's north of what we earn on the Cypher drug-eluting stent," Phillip Ankeny Senior VP and CFO of SurModics said during the conference call.
The company began its focus on ophthalmology with the purchase of InnoRx (Mobile, Alabama), a drug delivery company, for $4.1 million (MDD, January, 20, 2005). The company was further bolstered with its purchase of Brookwood Pharmaceuticals (Birmingham, Alabama) back in August of 2007.
News from yesterday's announcement caused SurModics stocks to soar by midafternoon. The company's' stock closed at $29.04 per share Tuesday, up 19.65% from Monday's closing price.
In other dealmaking activity:
• American Medical Systems Holdings (AMS; Minneapolis) reported the divestiture of its female sterilization assets and technology (Ovion technology) to Conceptus (Mount View, California) for $23.6 million. Also, as a result of this asset sale agreement, and separate agreements completed with third parties, AMS eliminated all existing and potential obligations and liabilities under previous agreements associated with the Ovion technology.
Under the 2003 settlement agreement, Conceptus had been making royalty payments to AMS equal to 3.25% of the company's Essure sales. Following this acquisition, the company will no longer owe these royalty payments. Commencing in 4Q09, Conceptus will amortize the cost of the intangible assets acquired over the remaining life of the patents, which is about eight years.
The amortization of intangible assets is expected to be less than the previous royalty payments, making this transaction accretive for Conceptus. The company anticipates recording a benefit of 5 cents per fully diluted share in 3Q09 as a result of the acquisition due to the release of the company's royalty obligations under the 2003 settlement agreement.
• Athenahealth (Watertown, Massachusetts) a provider of internet-based business services for physician practices reported that it has signed a definitive agreement to acquire Anodyne Health Partners (Alpharetta, Georgia) a provider of Software-as-a-Service (SaaS) business intelligence (BI) solutions for healthcare providers. Terms of the merger agreement include a cash payment of $22.3 million with the potential for additional consideration of up to $7.7 million, based on the achievement of certain business and financial milestones. The transaction is expected to close in October.
• Global Med Technologies (Lakewood, Colorado), an international healthcare information technology company, reported that it has signed a binding letter of intent with Bonfils Blood Center (Denver) to acquire Hemo-Net (also Denver). A subsidiary of the blood center, Hemo-Net is a pioneering application service provider (ASP) specializing in the medical technology field. Hemo-Net currently hosts business solutions for Global Med's customers in the U.S. and Africa. Hemo-Net's revenues in the next calendar year will be nearly $900,000, with an expected positive EBIDTA. The acquisition is expected to close by Nov. 1. Terms of the agreement were not disclosed.
• Varian (Palo Alto, California) reported that at a special meeting of stockholders held on October 5, 2009, its stockholders adopted the merger agreement entered into with Agilent Technologies (Santa Clara, California) under which Agilent will acquire Varian for $52 per share in cash, or about $1.5 billion (MDD, July 28, 2009).
Nearly 84% of the shares of Varian common stock outstanding as of August 12, 2009, the record date for the special meeting, voted to adopt the merger agreement. The transaction remains subject to regulatory approvals and other closing conditions.