Shares of the clinical-stage biotech Minerva Neurosciences (NASDAQ:NERV) gained as much as 35% in early-morning trading today on sky-high volume. The catalyst that sparked this sizable rally is the news that Minerva and Johnson & Johnson (NYSE:JNJ) have agreed to amend their licensing deal related to the experimental insomnia and major depressive disorder drug candidate MIN-202 (JNJ 42827922).
As part of the amended agreement, Minerva will repurchase all shares currently owned by J&J at a par value of $0.0001 per share. Moreover, the company will also receive an up-front payment of $30 million, and is eligible for payments of $20 million at the start of a phase 3 insomnia trial for MIN-202, as well as another $20 million when 50% of the patients are enrolled in this trial. Finally, Minerva will now have global strategic control over the clinical development of MIN-202 to treat insomnia, and J&J will hand back the right to royalties on the drug's insomnia sales in Minerva-controlled territories.
According to the press release, Minerva believes this agreement will facilitate a faster development timeline for MIN-202 and support the clinical progress of its lead product candidate, MIN-101, as a treatment for negative symptoms in schizophrenia. In other words, the company expects this deal to hasten its transformation into a commercial operation. Having said that, there is the matter of actually paying for MIN-202's clinical development moving forward.
Although management noted in its remarks that this amended agreement will significantly extend the company's cash runway, Minerva will now bear the substantial costs associated with the phase 3 development for MIN-202 in insomnia. So, investors shouldn't be too surprised if this spike in Minerva's share price is accompanied by a secondary offering in the not-so-distant future. Minerva, after all, exited the most recent quarter with a mere $85.4 million in cash, and the company plans to accelerate its clinical activities in a big way on the back of this revised deal. Stay tuned.