OncoMed (OMED) rose nearly 100% to $27.70 per share on December 3, 2013, when it announced that an agreement with Celgene (CELG) to co-develop and market six anti-cancer stem cell agents. The initial terms of the deal more than double OncoMed’s available cash and provide significant development and marketing support for each agent.
Yesterday’s price action reflects both OMED’s improved financial position as well as an increased likelihood that a partnership will enable OMED to get approval and successfully sell its cancer agents. The combination of funding and commercialization skills helps move Oncomed from a development stage company to a company with the wherewithal to get products to the market. In addition, the agreement will enable OMED to fund development of additional compounds that are not included as part of the deal.
Under the terms of the agreement OMED received $155M in upfront cash along with $22.25M in additional cash from the sale of approximately 1.5 million shares in a private placement. In its press release, OMED estimated that if it meets all of its milestones and development targets, that it could receive an additional $2.8 billion in milestone payments on top of any royalties and product sharing from successful commercialization.
The key compound in the arrangement is Demcizumab (also known as OMP-21M18 Anti DLL4), a monoclonal antibody optimized to block Delta-like ligand 4 (DLL4) in cancer stem cells. OMP-21M18 demonstrated single-agent activity in a Phase 1 study in heavily-pretreated solid tumor patients. Demcizumab is currently finishing phase 1b treatments for first line advanced stage pancreatic cancer and has two additional phase 1b trials underway. If Demcizumab gets regulatory approval, the companies will co-commercialize the product and split profits. Payments could total up to approximately $790 million, including an undisclosed payment for achievement of pre-determined safety criteria in Phase II clinical trials.
The second key item in the agreement is the development of a DLL4/VEGF biospecific antibody. This compound is currently in preclinical trials.
