NeoRx Corp. was to announce today that it has signed a letter ofintent to develop its OncoTrac cancer imaging products withBoehringer Ingelheim International GmbH.
The deal is worth at least $21.6 million. The German companyultimately could invest up to $23.5 million in NeoRx and plansto spend $10 million on its own behalf.
The deal is focused on NeoRx's lung cancer imaging product,which consists of an antibody linked to technetium-99. The NR-LU-10 antibody reacts to all of the major malignancies with theexception of melanoma, said Paul Abrams, president and chiefexecutive. BI has an option to ask NeoRx to develop theantibody for other imaging indications.
The FDA in January completed its review of clinical data onNeoRx's OncoTrac small cell lung cancer imaging agent. "Theonly outstanding issue we're aware of is to qualify BI as themanufacturer of the product," Abrams said. NeoRx will have todo in vitro analyses to demonstrate equivalency and a smallpatient study to show that the BI product behaves like NeoRx'sproduct. Abrams made no predictions as to timing, but said thepatient study wouldn't take long.
NeoRx has completed Phase III trials for non-small cell lungcancer, but hasn't yet filed for marketing approval.
Under the agreement, Boehringer will make a two-stage equityinvestment for 2.84 million shares of NeoRx common stock,giving it 9 percent of NeoRx shares (NASDAQ:NERX)outstanding. At the closing, BI will pay $8 million for about 2million shares at $4.02 per share. When data are submitted tothe FDA to qualify BI as the manufacturer of OncoTracproducts, BI will purchase for $3.6 million an additional852,000 shares at $4.27 per share.
BI will also receive two warrants to buy an additional 2.5million shares of stock for $11.9 million, which would bring itstotal holding to 16 percent of shares outstanding. The firstwarrant is to purchase 1 million shares at $3.96 and the secondis for 1.5 million shares at $5.28.
At the point where NeoRx's stock price exceeds twice theexercise price of the warrants, BI will have to exercise thewarrants or they will lapse, but BI can't be forced to exercisethe warrants for one year. If the warrants are exercised, BI'stotal investment in NeoRx would come to $23.5 million.
NeoRx shares closed at $4, up 44 cents, on Wednesday.
BI will invest $10 million in its own process development. TheGerman company will have worldwide manufacturing rights forthe antibody for the OncoTrac imaging kits and exclusivemarketing rights outside of North America. NeoRx will receiveroyalties on sales and retain North American marketing rights.
BI also has the right to use certain NeoRx labelling technologyto develop products of its own, but there are no specific plansat this point, Abrams said. BI also has non-exclusive rights touse NeoRx's rhenium labelling technology for therapeuticproducts and the right of first refusal to develop a productusing a chimeric version of NR-LU-10 if NeoRx chooses todevelop it with a partner. The Seattle company is currentlydeveloping the technology independently.
NeoRx is awaiting FDA approval of another imaging product, formetastatic melanoma. That product isn't included in the deal,but BI has an option to it.
-- Karen Bernstein BioWorld Staff
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