Drug development biopharmaceutical company Proteologics Ltd. today revealed in its prospectus for a Tel Aviv Stock Exchange (TASE) IPO that it has signed a material agreement with GlaxoSmithKline plc (NYSE; LSE: GSK). The agreement has a potential value of $1 billion, with initial payments to Proteologics amounting to several million dollars.
Proteologics gave GlaxoSmithKline an option to commercialize cancer drugs that will be derived from Proteologics' six drug discovery platforms. GlaxoSmithKline will pay $3 million when the contract is signed, and commits to financing R&D by Proteologics; GlaxoSmithKline will provide $2 million in the first year and $1.7 million each in the second and third year for a total payment of $8.4 million. Proteologics will bear any additional R&D costs.
GlaxoSmithKline also committed to make milestone payments on progress by Proteologics' molecules discovered by the development program, and trials and registration of the molecules. The total amount that will be paid for each drug is $176 million. In other words, if every drug in the development program succeeds, Proteologics could receive more than $1 billion, as well as royalties on sales. This is an improbably optimistic scenario, however.
Most of the milestone payments will be made in the later stages of the contract, when the drug development is in the discovery through market stages, which could take ten years or more.
GlaxoSmithKline will also invest $2.5 million directly into Proteologics at the share price set in the IPO, provided that the company raises at least $7.5 million.
In the prospectus, Proteologics said that it plans to raise NIS 35 million, but did not disclose a company value for the offering. The company value will probably be $30-40 million. The offering is partly guaranteed by underwriters; the underwriters have pledged to buy NIS 27 million worth of shares if the public places at least NIS 3 million in orders.
Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), which owns 50% of Proteologics' parent company, has already promised to place NIS 3 million in orders.
In a statement to investors, Proteologics said that its strategy is to commercialize its products to other companies after the feasibility stage, but before the regulatory approval stage, which is expensive and high risk. In other words, the commercialization will follow animal or Phase I human clinical trials. Most young companies like Proteologics seek to commercialize their products at this stage, but fail to do so. However, Proteologics' two agreements with Teva and GlaxoSmithKline indicate that its products have generated great interest at the very early development stages.
On its website, Proteologics said that it has raised $33 million from Teva and Israeli funds Concord Ventures, Challenge Fund - Etgar, and Giza Venture Capital.
Published by Globes [online], Israel business news - www.globes-online.com - on February 22, 2010
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