By Mary Welch
Cortech Inc. signed a deal to license the worldwide rights to its oral elastase inhibitor program for $2 million to Ono Pharmaceutical Co., with the potential for milestone payments up to $9.5 million more.
The agreement is just what the company needed, said Paul Koether, chairman of Bedminster, N.J.-based Cortech.
"We've got one employee, a pile of money, an $89 million tax loss and some long-suffering shareholders," Koether said.
Until this agreement, Ono's rights to the technology were limited to Korea, Japan, China and Taiwan. The new deal includes potential milestone payments of up to $9.5 million.
"It's the first time in the company's history we've been cash flow-positive," Koether said. " Of course, with only one employee, we've really cut down to nothing."
Elastase is a protein-degrading enzyme released from neutrophil and may play a major role in tissue damage and organ failure in severe inflammatory conditions. Ono, based in Osaka, Japan, plans to conduct trials targeting chronic obstructive pulmonary disease and rheumatoid arthritis.
"Cortech suspended all research and development and has no ongoing programs," Koether said. "Anything Ono does with this, they'll be doing it alone."
Cortech's story is one of failed drugs, abandoned partnerships and an aborted merger. The company's troubles date back to 1995 when disappointing Phase II results on Bradycor, a bradykinin antagonist, prompted the stock to hit rock bottom. The company cut staff from 75 to 30. Its partner, SmithKline Beecham plc, of London, bailed out. (See BioWorld Today, July 19, 1995, p. 1; July 20, 1995, p. 1; March 26, 1997, p. 1, and April 25, 1997, p. 1.)
The company, then located in Denver, also lost Hoechst Marion Roussel, of Frankfurt, at the Phase II trial level as a partner for CE 1037, a parenteral human neutrophil elastase inhibitor designed to treat acute respiratory distress syndrome and cystic fibrosis. Cortech hoped to recover by hitching its star to BioStar Inc., a privately, held, Denver-based diagnostic company that needed its cash and public trading status. However, both companies called the merger off.
Koether, now chairman of Cortech, was manager of Asset Value Fund LP (AVF), of Bedminster, N.J., which was Cortech's largest shareholder. AVF sued Cortech, aiming to increase its board to seven members, which included electing four AVF's nominees in opposition to Cortech's management at the time.
This new alliance with Ono allows Cortech to possibly deploy its cash assets in new ways, while actively seeking an acquisition and/or a merger partner. The company has 1.8 million shares outstanding.
"We are considering merging but it'll be in the best interest of the shareholders," Koether said. "We've talked with companies which either aren't profitable, which isn't acceptable, or, if they are, [they] have valuations that are too generous. We're looking to find a profitable business, or merge with one that will be good for the shareholders."
Cortech's stock (NASDAQ:CRTQ) closed Thursday at $6.25, unchanged.