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Biotech / Medical : Neurobiological Tech (NTII) -- Ignore unavailable to you. Want to Upgrade?

To: John Dwyer who wrote (332)	4/20/1998 9:56:00 AM
From: Biomaven	Read Replies (1) \| Respond to of 1494

John, Here's my reading of the announcement: (Hopefully there should be an 8-K filing giving more details soon.) NTII has given up all US rights to memantine in exchange for a share in Merz's revenue stream from all indications for memantine (presumably only in the US, but it didn't actually say so). My assumption is that Merz will fund/perform all future US trials for all indications. What this means is that the likelihood of eventual memantine US approval is substantially increased, particularly as Merz's European data can be incorporated into the application. Presumably Merz would not have done this deal unless their own memantine data was promising. How good a deal is this for NTII? If my interpretation is correct, I think it removes most of the financial risk from the stock. The key unknown is what the royalty rate is going to be. I would guess something like 7%, with another few percent to Children's. If memantine is a $100m drug, this is still a healthy royalty for a small company - around $1 per share. If it works in general dementia (not just Aids), then it could be a $500m drug. The above is mostly speculation. I bought some on the morning the deal was announced at just over 1. Trading was somewhat strange - I put in my order when the price was still well under 1, with a 1 1/4 limit. Lots of trades below 1 then ensued before I got a partial fill at 1 1/16 followed quite a bit later by the remainder at 1 1/32. (And I wasn't buying large amounts of shares here). With the capital infusion and the price above $1, I wonder if they will now qualify for NASDAQ again? Anyone know what all the requirements are? Peter

To: John Dwyer who wrote (332)	4/20/1998 9:12:00 PM
From: Dr. John M. de Castro	Respond to of 1494

NTI ran the Phase IIa trial for very little money. Look at their burn rate last year while running it. In addition, they have fewer personnel now than then. So, IMHO they can get through the Phase IIb with the cash that they have. Keep in mind that they already have the clinical sites set up, a motivated patient population with little alternative, and the drug will probably be supplied by Merz. Hence, this can be done very inexpensively. As I understand the deal, NTI/Merz are now out looking for a big pharma to license marketing rights to. My guess is that a Phase III for neuropathic pain will not be run without one. However, NTII's data on memantine were promising but sparse. The addition of the wealth of data that Merz has on memantine greatly strengthens the case they can make to a potential partner and eventually to the FDA. If Freiman could sell a conservative company like Merz on a deal with sparse data, I feel confident that he can sell a big pharma on a deal now that he has a briefcase full of data. One of the real strengths of this deal is that it greatly lessens the risk for NTII. Even if the Phase IIb for memantine bombs completely (look what happened to IPIC's Citicholine), they can still obtain significant value from memantine for the dementia indication. This is a whole new ballgame. The market here is massive. Even if they only have a small piece of the eventual revenues, it could be a major influx of cash to a mico cap like NTII. Thanks for raising the issues John. I wish there were more good probing questions on the SI threads and less cheer leading. John de C