Its losses mounting, NeoRx Corp. on Wednesday pocketed $7.9 million in cash after agreeing to sell some of its intellectual property as well as certain license and option rights to IDEC Pharmaceuticals Corp.
In fact, the company is looking to shed assets in an effort to stay the rapid rate at which it has lost money.
"Biotech is based on innovation, and this is one of the companies that really has had an effective patenting program," NeoRx President and CEO Doug Given told BioWorld Today. "But you have to make products, you have to translate those innovations and patents into products. I think that translational activity is a really interesting and current opportunity for NeoRx. This is a source of value that hasn't been understood by our shareholders or the marketplace, but we want to make a statement."
As of Sept. 30, its cash and investment securities position totaled $12.4 million, compared to $33.6 million on Dec. 31.
But the company is looking beyond the third-quarter earnings report.
"We're extremely excited to have a nondilutive source of cash coming into the company," Given said. "And given the size of our operation, that really is a material event for us. This really changes the financial urgency that the company was facing."
He said NeoRx's spending in the next year would slow to $10 million to $12 million - equivalent to a full year of cash, said Melinda Kile, the company's vice president of finance. And apparently the IDEC sale is not the only revenue-generating move in the works at the Seattle-based firm.
NeoRx is fighting to grasp for fresh funds.
Last month the company terminated 42 positions, or 38 percent of its work force. Such moves are part of a previously announced program to conserve cash.
"It's different than simply restructuring in a difficult time," Given said. "We've done this in a purposeful way to really use more operating leverage in the company and free up committed capital until we have positive milestones in our programs."
NeoRx said it saved $100,000 through the job reductions at its facility in Denton, Texas, a location that nonetheless continues to manufacture the Skeletal Targeted Radiotherapy therapy used in its Phase II dosimetry study. Management reductions also were aimed at cost savings - NeoRx eliminated two senior management positions after the departures of its chief financial officer and senior vice president of operations, filling those duties with staff still on hand.
But the personnel changes are not hindering development of the Skeletal Targeted Radiotherapy program, which Given called NeoRx's dominant near-term asset on which it is focusing all internal development efforts. Enrollment of multiple myeloma patients in the dosimetry study is continuing and expected to be completed by the end of the year, with three sites currently treating patients. Given said NeoRx expects to consult with the FDA by the end of next year's first quarter in an end-of-Phase II meeting.
"Our development forecast is that this will reach the market in late 2006 or 2007," Given said. "The ability to attract the capital necessary to bring it to market over the next five years is uncertain. I think we could increase return to the shareholder and reduce the risk of the product by partnering development. And there are a number of partners out there who bring a lot of expertise to the radiopharmaceutical arena."
Assuming positive feedback from the agency, Given said the program would enter Phase III late next year. But such continued clinical development obviously costs significant amounts of cash, and NeoRx's cash needs appeared pressing based on its most recent earnings report.
For the third quarter, NeoRx's net loss climbed to $11.5 million, or 44 cents in diluted per-share loss after preferred dividends, up from a net loss of $7.5 million, or 29 cents, in 2001's third quarter. NeoRx said its third-quarter net loss contains a noncash asset impairment charge of $5.7 million related to the difference in the estimated market value of assets as compared to the net book value of assets located at its Texas radiopharmaceutical manufacturing facility and research and development facility in Seattle.
But its nine-month loss grew as well, up to $26 million, compared to a net loss of $16.6 million. Revenue climbed to $500,000 during the quarter, up from $300,000 reported in last year's third quarter. For the nine months, revenue rose to $2 million, up from $1.4 million in the year-ago period.
But NeoRx also expects to raise cash by out-licensing other intellectual property from its patent portfolio, which includes more than 100 issued U.S. patents relating to the Pretarget technology, cardiovascular drug delivery technologies, drug targeting and other fields.
"We have additional opportunities for further reduction in spending without really harming the prospects for the Skeletal Targeted Radiotherapy program," Given said. "We may choose an operating plan that takes us out even further.
Skeletal Targeted Radiotherapy is designed to deliver high doses of radiation to tumor sites throughout the skeleton, with minimal damage to organs outside the bone. It targets bone and adjacent marrow with a small-molecule bone-seeking agent known as DOTMP, combined with the radionuclide holmium-166.
"One of the things we're looking hard at now with external advisers is that portfolio, and saying to ourselves, Where should we turn for the next technology and product opportunity where we have really strong intellectual property.' I think over the course of the next couple of quarters," Given said, "we'll identify programs one at a time where we have the ability to participate strongly by combining our IP with technology packages that have developed in the industry over the last three or four years in these fields."
San Diego-based IDEC's intellectual property purchase includes a portfolio of U.S. and international patents and certain associated technology and know-how relating to antibody-based therapeutics and ligand-linker technology. In addition to the cash on hand, NeoRx may receive future royalty payments with respect to certain unnamed products.
NeoRx's intellectual property rights to its Skeletal Targeted Radiotherapy or Pretarget programs were not included in the sale.
NeoRx's stock (NASDAQ:NERX) gained 4 cents Wednesday to close at 60 cents.