Portfolio News
Transcept Forms New Purdue Deal For Sleep Drug Sales
VentureWire
Lorie Konish
4 August 2009
Transcept Pharmaceuticals Inc. has formed an exclusive license and collaboration agreement with Purdue Pharmaceutical Products LP that will bring the company $25 million in upfront cash.
The deal bolsters Transcept's already strong cash position after the reverse merger it completed with publicly traded Novacea Inc. last year, according to President and Chief Executive Glenn Oclassen. As of the end of the first quarter, Transcept had $81 million in cash, Oclassen said, and this deal ties up another potential $55 million based on the signing approval with Purdue and potential regulatory approval for its lead product.
"As a result of this and the reverse merger, we have no plans on the books at this point to raise any more money," Oclassen said.
Transcept, which currently has a little more than 50% ownership by venture capital investors, drew from those investor connections in forming this deal, Oclassen said, as InterWest Partners General Partner and Transcept Director Chris Ehrlich previously worked in business development at Purdue. The company selected Purdue after considering other potential partners for its ability to introduce the company's sleep drug to the primary care market. The deal fit Purdue's plan to diversify its product portfolio and commercial focus, according to a prepared statement from the company.
With the deal, Purdue and one of its associated companies now have the exclusive right to market, sell and distribute Intermezzo, a zolpidem tartrate sublingual tablet aimed at treating middle-of-the-night sleep difficulty, in the U.S. Purdue also has the right to negotiate for product commercialization in Canada and Mexico.
Through the deal, which closed on Friday, Transcept stands to earn additional payments of up to $30 million, in addition to the upfront payment, based on the timing of the potential Food and Drug Administration approval of Intermezzo. In addition, Transcept may also receive up to $90 million in future milestones through intellectual property and U.S. net sales targets.
Transcept may also receive double-digit royalties starting from the mid-20% level on U.S. net sales. Transcept can enter the market under a psychiatry co-promotion option starting from the first anniversary of Purdue's commercial launch of the drug.
Point Richmond, Calif.-based Transcept's venture investors draw from a mix of previous Novacea and Transcept investors, records show. Prior to the merger, Transcept raised about $70 million in venture capital and $10 million in debt, which has since been repaid, Oclassen said. Novacea previously raised about $108 million prior to its 2006 initial public offering, according to VentureWire records. Novacea's merger with Transcept occurred after the failure of its Phase III prostate cancer targeted treatment.
Transcept's stockholders owning more than 5%, according to an April 29 proxy statement, include New Enterprise Associates, with 15.9%; New Leaf Venture Partners, 12.5%; Montreux Equity Partners, 10.2%; InterWest, 9.6%; and Hamilton BioVentures, 7.6%.
Transcept's board currently includes previous Novacea investors New Enterprise Associates and Versant Ventures, according to the company's Web site, and Transcept investors InterWest Partners, Montreux Equity Partners and New Leaf Venture Partners. NEA also previously invested in Transcept before the merger, VentureWire records show.
Other previous investors still listing the company as a current portfolio company include Hamilton BioVentures, ProQuest Investments and Vivo Ventures. Domain Associates, Sears Capital Management and Sofinnova Ventures all list Novacea as a former investment. Peninsula Ventures was not available for comment by press time on the status of the firm's position with the company.
With its reinforced strong cash position, Transcept plans to pursue the development of other potential products, with a particular focus on psychiatry indications including obsessive compulsive disorder. The company may consider the acquisition of potential products, Oclassen said, while its strong cash position could lead to potential acquisition suitors. For now, the company is focused on building an independent pharmaceutical company.
"This fundamentally gives them a really strong balance sheet," said New Leaf Managing Director and Transcept Director Kathy LaPorte. "And if things go well with the FDA, the product should start spitting out profits relatively quickly."
