Miljenko,
This article cites an analyst with high single digit royalty est. What do you think? It would be very risk averse of nrgn if they took as low as 7%, so I think they probably did better than Dietz thinks.
Dow Jones Business News
Neurogen's Stock Soars After News of Merck Partnership
Monday December 1, 4:22 pm ET
By Gretchen L. Wilson
NEW YORK -- Shares of Neurogen Corp. (NasdaqNM:NRGN - News) reached a 52-week high Monday after it formed a partnership with pharmaceutical giant Merck & Co. to develop novel small-molecule drug candidates for the treatment of pain and urinary incontinence.
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If regulators approve the deal, Merck will make an upfront payment of $30 million to Neurogen -- $15 million in license-fee payments and a $15 million payment of Neurogen common stock at the average market price for the last 25 days.
Pacific Growth Equities analyst Tom Dietz said the announcement came as a surprise to investors and analysts alike. "Nobody was expecting this deal," he said in a telephone interview.
At 4 p.m. EST on the Nasdaq Stock Market (News - Websites) , shares of Branford, Conn.-based Neurogen -- which has 18 million shares outstanding -- were up $4.09, or 64%, at $10.47 on volume of about 4.6 million shares. The daily average is 24,300 shares. The stock earlier hit a 52-week high of $11.91, above the previous high of $7.70 set Sept. 24.
Mr. Dietz said the partnership to research and develop vanilloid receptor, or VR1, drug candidates is "certainly a very good deal" for Neurogen and sends a " big message," as Merck has one of the most-developed VR1 programs in the industry.
"Merck's deal is showing that Neurogen is one of the leading, if not the leading, player in the VR1 space, one of the focal points for drug discovery efforts to develop anti-pain drugs," he said.
Mr. Dietz added Neurogen will receive high single-digit royalties in the partnership, which he estimates at between 7% to 10%. "This is very good for a preclinical product," he said.
Mr. Dietz also said he doesn't anticipate any barriers to Hart-Scott-Rodino regulatory approval of the partnership. "I've never seen a deal like this not go through," he said, adding, "It should clear fairly quickly."
Neurogen spokeswoman Elaine Beckwith said the company is excited to be collaborating with Merck, particularly because "their marketing capabilities in this area are superb."
She noted Neurogen had publicly declared it was looking for partnerships in its VR1 plan.
"We do have other unpartnered programs here and we certainly will be looking for other partners," said Ms. Beckwith, adding the firm's most-developed programs include those for the treatment of inflammation -- including rheumatoid arthritis and asthma -- and obesity and diabetes.
Pacific Growth Equities doesn't have an investment-banking relationship with Neurogen, but it does make a market in the stock. Mr. Dietz doesn't own shares of the company. |
