WHO said biotechs were a waste of time and good money? Your columnist admits he's done so on more than one occasion, but we dip our lids to Acrux after its stunning licensing deal that will see its testosterone treatment Axiron marketed globally by big pharma Eli Lilly.
The deal, claimed to be the biggest licensing arrangement entered into by a local biotech, has a headline value of ``up to'' $US335 million ($367m) -- plus royalties believed to be worth about two-thirds of this ($US220m).
The worth of the complete package -- around $600m -- implies a value per Acrux share of $3.75, but there's a time value of money discount and other risk factors involved as well.
Axiron comes in a deodorant-style pack and is applied to the underarm to treat low testosterone levels in blokes. The all-powerful US Food & Drug Administration has allowed Axiron to be submitted as a new drug application, with marketing approval expected by the end of the year.
In giving up its global rights to Eli Lilly, Acrux receives $US50m up front and $US3m for the transfer of the manufacturing assets. These equate to 36c a share.
Acrux then receives $US87m after the FDA grants marketing approval, $US195m in "potential commercialisation milestones" and royalty payments on "future global sales if Axiron is successfully commercialised".
But, management stresses, the "cash flows from royalties comprise a substantial part of the value of the deal to Acrux".
"The royalty rates are confidential, but in Acrux's view are broadly consistent with comparable late-stage licensing deals," it said.
According to Biotech Daily's David Langsam, Acrux's royalty cut can be expected to be in double-digit territory. "It's a good deal," he says.
Acrux is confident enough to forecast a maiden net profit of $44m-48m in the year to June 2010, with -- drum roll -- a dividend payout in 2010-11.
Acrux is confident it has found the right partner because Eli Lilly already markets Cialis, a treatment for erectile dysfunction. Eli Lilly has also been through the FDA process zillions of times, which should greatly help the approval process.
Acrux shares rose a modest 20c initially, but the last time we looked they were unchanged. Bear in mind that the stock has zoomed up from $1.80 over the last month on rumours the company would be sold. Criterion last had the stock as a spec buy at $1.35 in early September, on similar chatter.
Our rating is under review.
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