12:00 AM
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Oct 29, 2012
 |  BioCentury  |  Finance

NextWave's option arithmetic

Pfizer M&A gives NextWave investors 2.5X - possibly up to 7X - return

NextWave Pharmaceuticals Inc.'s investors are in line for at least a 2.5X return on the $105 million they have put into the CNS company after Pfizer Inc. (NYSE:PFE) exercised an option to acquire it last week. The news follows last month's FDA approval of the biotech's ADHD drug Quillivant XR.

The pharma paid $20 million for the option in 2012. In exercising it, Pfizer agreed to pay $255 million up front plus up to $425 million in milestones. The total would come to $700 million if all of the undisclosed milestones pan out, representing a possible return of just under 7X.

Vivo Ventures and Sofinnova Ventures were NextWave's founding investors in 2005. The syndicate later expanded to include Panorama Capital, Bay City Capital, Kearny Venture Partners, Aisling Capital and Fidelity Biosciences.

NextWave's Quillivant is a new twist on methylphenidate, which has been known for decades as Ritalin, and represents the only oral suspension formulation of the drug on the market, according to Vivo's Frank Kung.

Sofinnova's Anand Mehra said NextWave recognized the need for a once-daily liquid form of methylphenidate, which will be easier to use in children than pills.

Quillivant uses Tris OralXR drug delivery technology from Tris Pharma Inc.

Kung said NextWave's investors made sure the company was sufficiently capitalized to launch the product on its own, thus strengthening its bargaining power with potential partners and acquirers.

He added: "The option arrangement was the ideal structure because if Pfizer chose not to exercise the option post-approval, we would still be well positioned for a robust commercial launch with additional non-dilutive capital."

Jefferies advised Pfizer, while Kaye Scholer and Ropes & Gray provided legal counsel. Aquilo Partners advised NextWave, and Cooley provided legal counsel.

NextWave's pipeline includes a chewable tablet formulation of Quillivant, which is in Phase III testing with an NDA submission planned for next year.

Tables

Earnings on deck
Company Date Pre/post mkt 3Q12 EPS est 3Q11 EPS Expected chg
UCB Group (Euronext:UCB) 10/29 Pre NA NA NA
Life Technologies Corp. (NASDAQ:LIFE) 10/29 Post $0.89 $0.94 -5%
Luminex Corp. (NASDAQ:LMNX) 10/29 Post $0.06 $0.05 20%
Vertex Pharmaceuticals Inc. (NASDAQ:VRTX) 10/29 Post $0.19 $1.02 -81%
Ipsen Group (Euronext:IPN; Pink:IPSEY) 10/29 NA NA NA NA
Mitsubishi Tanabe Pharma Corp. (Tokyo:4508; Osaka:4508) (A) 10/29 NA NA ¥35.58 NA
Qiagen N.V. (Xetra:QIA; NASDAQ:QGEN) 10/29 NA $0.24 $0.22 9%
Bayer AG (Xetra:BAYN) 10/30 Pre €1.15 €1.12 3%
Dendreon Corp. (NASDAQ:DNDN) 10/30 Pre -$0.86 -$1.00 NA
Allergan Inc. (NYSE:AGN) 10/30 Post $1.04 $0.92 13%
Onyx Pharmaceuticals Inc (NASDAQ:ONXX) 10/30 Post -$0.90 -$0.31 NA
Pfizer Inc. (NYSE:PFE) ...

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