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What likely triggered this share price increase was the company announcing a deal with Novo Nordisk, along with releasing its Q3 2018 financial results.
On Wednesday (October 31), Strongbridge BioPharma (NASDAQ:SBBP) announced two pivotal updates.
The company first announced a drug acquisition was with Novo Nordisk (NYSE:NVO), which acquired Strongbridge’s product, MACRILEN (macimorelin). The deal involved an upfront payment of US$145 million and a tiered royalty stream.
Strongbridge also released its Q3 2018 financial results, noting strengthened Q4 cash position, revised revenue guidance and initial revenue after a product launch.
Novo Nordisk acquired the rights to MACRILEN in the US and Canada. The company also purchased over five million shares of Strongbridge with gross proceeds amounting to US$36.7 million.
Novo Nordisk will pay Strongbridge royalty payments until 2027 related to the sales for the drug. Novo Nordisk will also fund and support Strongbridge’s rare endocrine commercial field organization for the drug for up to three years.
This deal aligns with Strongbridge’s objective to maximize the potential of MACRILEN, its CEO Matthew Pauls, said in the press release. Pauls added the upfront payment and equity investment also offers a big step in Strongbridge moving forward with its goal of developing rare disease treatments.
According to the release, the transaction is expected to close in December 2018.
MACRILEN is the only oral drug FDA approved for adult growth hormone deficiency (AGHD). This is a rare disease that increases morbidity and mortality. About 50,000 patients have the disease in the US, many of whom begin to experience GH deficiency as children.
Back to the quarterly release, its cash position will increase from the upfront payment of the deal with Novo Nordisk. Currently, it’s at US$67.4 million for cash and US$88.3 million for cash equivalents. Yearly revenue guidance for Strongbridge’s product KEVEYIS has been reduced to US$16-US$17 million from US$18-US$20.
The initial product revenue was for MACRILEN, which was launched in July 2018, at US$1.1 million.
Other key highlights from the financial results include: increased general and administrative expenses, revenue for KEVEYIS (dichlorphenamide) and cost of goods sold. Compared to the same quarter in 2017, those figures increased to US$19.6 million from US$8.5 million, US$4.2 million from US$2.5 million and US$1.4 million from US$0.6 million, respectively.
Strongbridge also plans to amend the clinical trial protocol for its ongoing Phase 3 LOGICS study by increasing participants. Topline results from this trial are expected in Q4 2019. An earlier update to look forward to is the Type C meeting with the US Food and Drug Administration (FDA) taking place in Q1 2019.
Strongbridge’s other product, KEVEYIS, is a treatment for episodes of extreme muscle weakness and temporary paralysis, or primary periodic paralysis. This is the only FDA approved drug for the condition.
Novo Nordisk is a Danish-based pharmaceutical company leading in diabetes care. It’s also developing drugs for obesity, hemophilia, growth disorders and other chronic diseases on a global scale.
Investor Takeaway
Likely stemming from both announcements, Strongbridge’s share price increased 58 percent over the trading period Wednesday to US$6.40.
Cantor Fitzgerald analyst Elemer Piros released a report on the company, giving itta 12-month price target of US$17 with assessing after-tax and risk-associated net present value. This was based on the company delivering value from the clinical development of Recorlev and commercial deployment of KEVEYIS.
According to TipRanks, Strongbridge currently has a strong buy based on three ratings from analysts, including Piros.
Investors interested in the company can keep an eye on year-end financial results to compare the guidance for KEVEYIS and other revenues. Another milestone mentioned is to look forward to topline results from the Phase 3 trial results in Q4 2019 and the Type C FDA meeting in Q1.
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Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.