This morning there was a micro-cap biotech that focuses primarily on dermatological issues, made what could be an interesting acquisition for the treatment of Psoriasis. CollaGenex Pharmaceuticals, Inc. (CGPI-NASDAQ) and QuatRx Pharmaceuticals Company today announced a licensing agreement under which CollaGenex will develop and commercialize becocalcidiol.
This is a patented Vitamin D analogue developed by QuatRx that is currently in Phase II clinical trials for the topical treatment of mild to moderate psoriasis. So it is not without risks because this is merely in Phase II studies. The company claims that unlike all other Vitamin D-based treatments for psoriasis, becocalcidiol does not appear to induce hypercalcemia, a ‘significant dose-limiting toxicity.’
It also states that according to the National Institutes of Health, approximately 7.5 million Americans have psoriasis, a non-contagious, chronic skin disease characterized by itching and red, scaly patches of skin. Here is the real issue though that was not brought out in this press release: Psoriasis is still a largely untreated skin disease that appears in numerous stages and numerous degrees of severity. It isn’t just that, though. Psoriasis isn’t just largely untreated, it is one of the most obvious blockbuster opportunities for drug and ointment companies to go after right now. There is no cure and no one that has claimed to be close to a cure, so if you win patient customers now you will have the ones that get positive results for years and years.
Olin Stewart, president/CEO of CollaGenex: "We have been in discussions with QuatRx for a number of months and have been very impressed with the quality of their research and development efforts. This license is another important step in executing our strategy to become a leader in therapeutic dermatology by developing a broad portfolio of innovative, proprietary products. The market for non-biological treatments of psoriasis is currently $600 million. This compound has great potential as a unique treatment for psoriasis and is an excellent fit for CollaGenex."
Dr. Klaus Theobald, Chief Medical Officer of CollaGenex: "Becocalcidiol has shown efficacy in the clinic and appears to be a non-irritating formulation for the treatment of psoriasis. It is unique among available Vitamin D analogues because it does not seem to promote hypercalcemia. If successfully developed, this product could provide significant advances in the topical treatment of psoriasis."
CollaGenex will pay an upfront licensing fee of $1.5 million to QuatRx and will be responsible for all further development costs. Additional fees are payable upon the achievement of various development and sales milestones. The agreement also provides for royalty payments linked to future product sales.
My own personal opinion is that this "$600 million" figure is grossly understated potentially by several times over. That is because most people either live without knowing they have mild cases or choose to not treat it and because most of the treatments on the market are not targeted and do not work that well. CGPI has a $215 million market cap, has close to $60 million cash on hand, and is producing light revenues. It was a bit surprising to see this only up less than 1% in mid-day trading; shares are up 0.7% at $10.12 and the 52-week trading range is $7.66 to $15.75. This looks like they just bought what could be one hell of a call option on a big treatment for mild to moderate cases of a widespread issue.
Jon C. Ogg
May 16, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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