Salix Pharmaceuticals, Ltd. (SLXP) recently announced that it has entered into a collaboration agreement with Norwegian specialty pharma company, Photocure, for the development and commercialization of Lumacan.
Lumacan has the potential to be used for the early detection and diagnosis of colon cancer. Lumacan contains hexamiolevulinate, which is used for the detection of bladder cancer.
Terms of the Deal
With this agreement, Salix will have exclusive rights to Lumacan in all territories excluding the Nordic region. Per the terms of the agreement, Salix will make an upfront payment of $4 million. Additional payments will depend on the successful development and commercialization of Lumacan. Salix could end up making milestone payments up to $126.5 million. In addition to these payments, the company will also have to pay royalty on net sales and non-US sublicense revenue.
While Salix will fund the worldwide development and commercialization of Lumacan, Photocure will contribute up to $3 million for formulation development activities.
Lumacan, if developed successfully, should fit well in Salix’s bowel cleansing franchise. Once approved, the product will enjoy three years of exclusivity in the US. According to the company, about 14 million colonoscopies are conducted every year in the US. The company estimates that Lumacan could achieve peak sales in excess of $500 million.
Our Take
We currently have a Neutral recommendation on Salix, which is supported by a Zacks #3 Rank (short-term “Hold” rating). The agreement with Photocure is in-line with Salix’s strategy of expanding its product portfolio through acquisitions and in-licensing agreements.
Going forward, new product launches and new indications for Xifaxan (rifaximin) should help boost revenues. The promotion of Apriso and Metozolv ODT will also be a high priority for the company. We believe the company will continue seeking suitable in-licensing opportunities in order to grow revenues.
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