Brain Biotech Sells License Rights for 128 Million Euros to Royalty Pharma

Brain Biotech is selling its license rights for the drug project Deucrictibant to Royalty Pharma. The company estimates the proceeds at up to 128.88 million euros. It looks like a “big deal” for a company that ended XETRA trading on Friday with a market capitalization of just 32 million euros and a share price of 1.47 euros.

After the announcement came in the evening after XETRA closed, the Brain Biotech share then had a big price party with a massive jump in price. The share price was last quoted in Tradegate trading at 2.82 euros, up almost 85 percent; the daily high was 3.19 euros.

Was the Brain Biotech course party on Friday justified?

The question about the jump in share price is: Was it justified? The company reports on the conclusion of the contract: “The value of this single transaction is more than four times as high as the entire market capitalization of Brain Biotech before the announcement of the transaction,” said Michael Schneiders, CFO of the Zwingenberg-based company.

However, the “big deal” has its usual industry “fine print” that shareholders of Brain Biotech and those who want to become shareholders must pay attention to. As is usual in the industry, a large part of the staggered payments is not certain. According to the Brain announcement, Royalty Pharma will only pay Brain Biotech 18.41 million euros in advance – so much for the secure income from this contract.

All further payments of the total amount of 128.88 million euros are, as the Brain news shows, dependent on whether agreed targets are achieved. According to the agreements, a further EUR 18.42 million could flow to Brain Biotech from regulatory milestone payments, for which the relevant requirements must first be met.

However, the maximum amount of more than 92 million euros is largely made up of potential long-term and, above all, sales-related milestone payments, which are correspondingly uncertain, both in terms of their occurrence and possible amounts.

The reason for the uncertainty surrounding regulatory and sales-related milestone payments: Deucrictibant has not yet been approved for the market or fully developed. The active ingredient is currently in clinical development at Pharvaris Netherlands NV and is to be used to treat the rare hereditary angioedema (HAE) – if development can be successfully completed and approval is granted. According to the latest information from Pharvaris, a registration-relevant phase 3 study for HAE prophylaxis is scheduled to start at the end of 2024.

Accordingly, the maximum amount that Brain Biotech is reporting for the deal depends on a large number of conditions that have not yet been met. The proceeds from the contract with Royalty Pharma are to be used for future growth financing, probably primarily for activities in the industrial enzyme market, as well as for repaying loans, according to Brain Biotech.

For now, however, the company can “only” plan with the more than 18 million euros from the advance payment. A further 9 million from short-term milestone payments are to remain with Brain Biotech. With a market capitalization of almost 62 million euros based on the Tradegate closing price, this is not a small amount, but it is a significantly different ratio than the 128 million euros to 32 million euros market capitalization.

However, Brain Biotech is hoping for further hits with its BioIncubator projects. “We have always believed in the significant value of our BioIncubator projects and are now beginning to increasingly monetize the strong pipeline investments of the past,” said CEO Adriaan Moelker.

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(Featured image by m. via Unsplash)

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