Minerva Neurosciences Inc. (NERV) said that it has opted out of its agreement with Janssen Pharmaceutica NV for the development of insomnia treatment seltorexant as it seeks to avoid financial obligations.
The decision will still allow Minerva to collect royalty payments on worldwide sales of seltorexant in the mid-single digits, with no financial obligations to Janssen, the company said. Shares rose 4.4% to $3.77 at the close on Wednesday.
“We believe opting out of our agreement with Janssen at this stage of the program creates real value for Minerva,” said Minerva CEO Remy Luthringer. “This decision enables us to retain a meaningful financial interest in the future revenue stream of a compound with significant commercial potential while eliminating the company’s financial obligations to a substantial Phase 3 program encompassing major depressive disorder and insomnia.”
Luthringer added that the move will help the clinical stage biotech company align its human and financial resources to focus on the approval of its lead compound experimental schizophrenia drug roluperidone, which is in Phase 3 development.
H.C. Wainwright & Co. analyst Douglas Tsao estimates that the move will save Minerva about $40 million in Phase 3 development costs in 2020.
“If Minerva had continued the partnership, it would have earned high-single digit royalties in the U.S. and earned the lion’s share of the economics in western European markets, but Minerva would have been responsible for 40% of Phase 3 costs,” Tsao said in a note to investors. “While we think seltorexant has great potential, there’s more value to be created with roluperidone, in our view, which remains wholly owned by Minerva.”
Shares have dived 72% since Minerva disclosed at the end of May that roluperidone did not meet its primary and key secondary endpoints in a Phase 3 trial.
Nonetheless Tsao is confident in roluperidone’s ultimate success reiterating a Buy rating on the stock with a $10 price target, which implies a whopping 166% upside potential over the coming 12 months.
Overall, Wall Street analysts have a cautiously optimistic outlook on the stock. The Moderate Buy consensus shows 4 Buy ratings versus 2 Hold ratings. The $6.60 average analyst price target indicates 75% upside potential. (See Minerva stock analysis on TipRanks).
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