By Mary Welch
NaPro BioTherapeutics Inc. and Abbott Laboratories entered into a partnership worth up to $125 million to develop and commercialize at least one formulation of paclitaxel for the treatment of cancer in the U.S. and Canada.
As part of the 20-year deal, NaPro received an up-front payment of $5 million, consisting of a $1 million initial fee, $2 million from the purchase of 400,000 shares of NaPro's common stock by Abbott, and a $2 million drawdown on a secured loan.
"It was a very good day," said Gordon Link, vice president and chief financial officer of Boulder, Colo.-based NaPro. "It took a year and a half to get to this point, but we received $5 million today, so it was a very good day."
In addition to the initial $5 million, NaPro will receive up to $7 million by the end of the year, consisting of another $1 million in fees, a $2 million equity investment and additional advances under the loan commitment of up to $4 million.
Ultimately, NaPro could receive up to $48 million in developmental milestones - $38 million in cash and $10 million for the purchase of stock. Abbot also has pledged an additional $57 million in milestone payments if NaPro meets certain regulatory and sales goals. NaPro also has access to $20 million under a secured loan arrangement from Abbott, of Abbott Park, Ill.
In all, Abbott will own 2 million shares of NaPro common stock (including the 400,000 just bought), assuming developmental milestones are met. Abbott has agreed to pay a total of $10 million, or about $5 per share - more than double the current price. If the full financial and developmental stipulations are met, Abbott will end up with nearly 10 percent ownership in NaPro, Link said.
NaPro's (NASDAQ:NPRO) stock closed Monday at $2.406, up 28.13 cents.
The two companies have been working together for several months and have even been in talks with the FDA for a pre-pivotal trial meeting, Link said.
"We have three ongoing clinical studies that we are jointly developing," Link said. "We are not disclosing in what indications, other than to say they are in certain types of cancer. Nor are we saying when we expect for Abbott to file the NDA [new drug application]."
For Abbott, the deal facilitates an expansion of its oncology program.
"We see oncology and cardiology as clearly representing growth franchises, both in the hospital products division and Abbott in general," Abbott spokesman Matt Kuhn said. "Any opportunity to build upon this franchise is good news for us."
In addition to jointly conducting trials with Abbott, NaPro will supply the drug in bulk. Abbott will be responsible for the formulation, regulatory filings, marketing and sale of the product. NaPro will license to Abbott its paclitaxel-related patents, including 12 issued in the U.S. and nine pending, as well as about 90 issued or pending patents outside the U.S. that may apply within the U.S. and Canada.
Paclitaxel is a compound extracted from the bark of the Pacific yew tree. Bristol-Myers Squibb Co., of New York, has approvals to sell its product - Taxol - for treating certain types of advanced breast and ovarian cancer. Its antitumor activity was discovered more than 30 years ago during a large-scale plant-screening program sponsored by the National Cancer Institute (NCI).
In 1979, scientists found that paclitaxel has a unique mechanism for preventing the growth of cancer cells. The compound affects fiber-like cell structures called microtubules, which play an important role in cell division and other cell functions. In the presence of paclitaxel, cancer cells are so congested with microtubules they stop growing and dividing.
Bristol-Myers Squibb was selected by the NCI to be its commercial partner in developing paclitaxel. Under the brand name Taxol, BMS made Taxol its priority research and development project in 1991. Ever since the drug was first approved in 1992, BMS has been vigilant in protecting the patent, which doesn't expire until 2012.
"We spent a lot in patent and legal work fighting Bristol-Myers in Europe and elsewhere," Link said. "There is no patent on composition or on the composition of the molecule itself. But there are patents on the formulation of paclitaxel and in the way it is administered to people. We expect our patents to be free of any conflict but we also expect Bristol-Myers to do everything they can to block us."
For its part, Abbott is confident of NaPro's situation.
"We looked closely at this issue, obviously," Kuhn said. "We are aware of all the patents and we do not see any infringement issues. We believe the patent situation allows for many layers of protection."
Separately, NaPro will use some of the cash to redeem $2.2 million of the remaining $3.3 million of outstanding principal and shares of its 5 percent senior convertible notes and its Series C convertible preferred stock, costing the company $3.1 million.