Mnemosyne, in which Clal Biotechnology Industries Ltd. (TASE: CBI) owns a 44% stake, today signed an agreement with international pharmaceutical company Novartis for commercialization of its product, a drug for psychiatric and neurological disorders, depression, autism, and Rett Syndrome.
Under the agreement, ownership of the product will pass to Novartis, which will take upon itself the entire drug development process, including an amount of financing that Novartis regards as suitable. Novartis will pay Mnemosyne a $6 million advance, $380 million in royalties if the product passes a number of milestones ($180 million relating to trials and bringing the product for approval, and $200 million more for milestones relating to sales targets), plus 10% royalties on revenue. The Clal Biotechnology share jumped 4% on the announcement, boosting its market cap to NIS 646 million.
In the Israeli biomedical industry, an agreement like this one is unusual for a product in the preclinical development stage, meaning that it is still undergoing animal trials. At the same time, in the international industry, deals of this size and at this stage have become more common in recent years in hot research fields.
Mnemosyne of one of three companies acquired by Clal Biotechnology in the framework of a deal with Len Blavatnik, who controls Clal Biotechnology through his controlling interest in Clal Industries and Investments Ltd. (TASE: CII). The previous owner was Access Bridgegap, a private company owned by Blavatnik. The three companies passed to Clal Biotechnology two years ago, due to his desire to concentrate his biomedical activity in one company.
The payment terms for the deal were very comfortable for Clal Biotechnology, particularly in retrospect, if today's deal with Novartis is taken into account. Clal Biotechnology undertook to pay $7.3 million for Blavatnik's holdings in the three companies, and the amount is accumulating 2.7% annual interest. Under this agreement, important events at the companies (such as the agreement with Novartis) could lead to earlier payment of the amount.
Likely to become significant for Clal Biotechnology
Several months after acquiring the companies, of which Mnemosyne is one, $6.9 million was raised for Mnemosyne, with Clal Biotechnology increasing its stake in the company. US venture capital funds Atlas Ventures and Slater Ventures also took part in the round.
Other than the financing round, Clal Biotechnology released no information until today about Mnemosyne, which is barely mentioned in the former's annual reports. Following today's deal, Mnemosyne will probably become a significant holding for Clal Biotechnology.
Clal Biotechnology finished 2014 with a huge NIS 367 million loss, resulting mainly from a NIS 253 million write-down for cancer drug company CureTech, following a commercialization agreement with Medivation. If the agreement results in payments for milestones and royalties, these will be recognized as profit.
The held companies contributed NIS 118 million to Clal Biotechnology's loss. The Andromeda affair, in which US company Hyperion halted development of a product for diabetes developed by the Andromeda company (acquired by Clal Biotechnology), after discovering irregularities in the clinical trial, had almost no effect on the numbers in the report.
Published by Globes [online], Israel business news - www.globes-online.com - on March 18, 2015
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