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What: Oh, how sweet it is! Shares of small-cap biopharmaceutical company Nektar Therapeutics (NAS: NKTR) spiked 16% today after the company agreed to sell the royalty rights to two of its drugs.
So what: Nektar agreed to sell its royalty rights to Cimzia, its Crohn's disease and rheumatoid arthritis drug marketed by UCB Pharma, and Mircera, a treatment for anemia sold by Roche (OTC: RHHBY). RPI Finance Trust bought the rights for $124 million. Certain thresholds were built into this agreement, so if Mircera doesn't hit undisclosed worldwide sales targets, Nektar would be on the hook through 2017 for annual payments ranging from $3 million to $7 million.
Now what: Given that Nektar is a late-stage clinical trial-based company, it's going to burn through cash in its quest for the next blockbuster drug, so today's move to secure more cash is definitely a smart one. Of course, I'm not too keen on the fact that it now has, more or less, no profit-potential royalty drugs under its wings. Selling its royalties was a necessary move, but it's not one that will get me on board with the Nektar Therapeutics bulls.
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At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.