Birds and bushes
The two developments around teduglutide impact NPS in different ways. The old saying "a bird in the hand is worth two in the bush" comes to mind. The European authorization is like the proverbial "bird in the hand" while the FDA review compares to the "two in the bush."
While the European authorization is a done deal, NPS shares the prospective financial benefits with Takeda Pharmaceutical. Through June 30, NPS received $40 million in license fees and milestone payments for teduglutide. NPS stands to gain $5 million more from the launch of the drug in Europe.
Takeda must pay royalties to NPS for sales of the drug outside of North America. These royalties will be a percentage in the teens of Takeda's net sales of the drug during the first 10 years, dropping to single-digits afterwards.
On the other hand, NPS retains all rights to sale of teduglutide in the U.S., Canada, and Mexico. An estimated 10,000 to 15,000 Americans per year receive nutrition through IV or tube-feeding because of the disease. There are no other approved products for long-term treatment. Assuming the FDA ultimately approves the drug, NPS seems poised for significant gains close to home.
The company has a strong track record in partnering with other larger organizations to market products that it develops. It teamed with Amgen
NPS licensed Nucynta, used in the treatment of moderate and severe pain, to Janssen, a unit of Johnson & Johnson
With solid partnerships and good news for teduglutide on both sides of the ocean, NPS Pharmaceuticals should probably be on the short list for investors looking at smaller biopharmaceutical companies that could take flight. The stock is up 26% in the past year, and in my view, appears likely to go up more. However, make sure to do your own homework before investing in the sector.
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Fool contributor Keith Speights owns no shares in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.