A Similar Deal?

My thanks to a blog reader who informed me of Genmab's licensing deal with J&J's Janssen subsidiary, which was announced last week on August 30. The structure of the deal has several features that I think could be similar to what Pfizer, or another Big Pharma company, might employ with Provectus (if indeed such a deal is consummated).

J&J's Janssen unit licensed, on an exclusive global basis, daratumumab, a human CD38 monoclonal antibody, from Genmab. Daratumumab currently is in Phase 1/2 trial development for multiple myeloma. Genmab also granted Janssen a license for a backup human CD38 antibody.

I thought it would be instructive to review the Genmab-J&J deal. Genmab received or will receive:

• An upfront license fee of $55MM (DKK* 327MM);

• An equity investment of $80MM (DKK 475MM) from J&J venture capital subsidiary Johnson & Johnson Development Corporation (JJDC) for 10.7% of Genmab. JJDC's cost basis for these new shares was DKK 88 per share. Genmab's closing share price on August 29 was DKK 67.85, so the equity investment was made at a 30% premium to the share price. CPH:GEN closing share price today was DKK 83.30. Together, the upfront license fee and equity investment infused Genmab with about $135MM in immediate capital;

• Development, regulatory and sales milestones of up to $1 billion; and

• Royalties of tiered double digit percentages (i.e., >10%). This assumes I understood the various descriptions of the deal structure in terms of royalty payments being in excess of milestone payments.

* DKK is the symbol for the Danish krone. At the time of reporting, US$1 = 5.9272 DKK.

According to Reuters, "[t]he deal led Genmab to raise its guidance for 2012 revenue to 435-460 million Danish crowns from 375-400 million, and cut its full-year operating loss forecast to 140-190 million from 200-250 million." The deal appears to be responsible for a 15-16% positive increase in top-line and a 32-43% less negative decrease in bottom-line guidance.

Genmab had about a DKK 3B market capitalization before the deal was announced. As of today's closing share price, the market cap was about DKK 3.7B.

J&J:

• Will own an equity stake in Genmab via JJDC;
• Will be fully responsible, via Janssen, for all costs associated with developing and commercializing daratumumab going forward, including the costs of two ongoing Phase 1/2 studies;
• While Genmab will be responsible for phase I/II trials (GEN501 and GEN503) with daratumumab, other development, clinical and regulatory filing activities will be handled by Janssen.
• Will explore at least 10 new studies, including phase 3 trials: Besides multiple myeloma, daratumumab may be evaluated for acute myeloid leukemia, diffuse large B-cell lymphoma, plasma cell leukemia, follicular lymphoma, acute lymphoblastic leukemia, and mantle cell lymphoma.