Novacea and Schering-Plough Prostate Cancer Pact; Remind You of Anyone?

Novacea (NOVC-NASDAQ) is seeing its shares up more than 70% after signing a pact with Schering-Plough (SGP-NYSE) over the development and commercialization of Asentar for the treatment of prostate cancer.  Novacea will receive an upfront payment of $60 million, including $35 million as reimbursement for past research and development expenses, a license fee of $25 million, as well as a commitment by Schering-Plough to purchase $12 million of Novacea common stock at a predetermined price within ten days of the closing. Additionally, the agreement provides Novacea with potential pre-commercial milestone payments of up to $380 million, and tiered royalties on worldwide sales of Asentar.

Novacea is currently conducting a large international Phase 3 trial evaluating Asentar in 900 patients with androgen-independent prostate cancer. Asentar is a novel, proprietary, high-dose oral formulation of calcitriol, a potent hormone that exerts its effects through the vitamin D receptor.  Schering-Plough will be responsible for all forward development costs in exploring indications for earlier stages of prostate cancer, such as androgen-dependent prostate cancer and adjuvant therapy and will lead all global commercialization efforts for Asentar. Novacea will provide medical support to Schering-Plough’s commercial operations for Asentar in the United States, including deployment of their Medical Science Liaisons, which will be funded by Schering-Plough.

Based on what happened recently with Dendreon (DNDN-NASDAQ), it looks like Novacea just eliminated much of the future risk from this side of the model.  There is of course a cost for that, but the investment community just gave it the thumbs up approval so far.

Jon C. Ogg
May 30, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.