What Does The Global BioPharma Deal Mean To Advaxis?

Dec.11.13 | About: Advaxis Inc. (ADXS)

The Deal:

On December 9, 2013, Advaxis Inc. (NASDAQ:ADXS) announced that it entered into an exclusive licensing agreement for the development and commercialization of ADXS-HPV with Global BioPharma, Inc. (GBP), a Taiwan based biotech company funded by a group of investors led by Taiwan Biotech Co., Ltd (TBC).

TBC is one of the top five pharmaceutical companies in Taiwan with annual domestic sales in excess of $100 million in the healthcare sector. TBC engages in the research, development, manufacture, representation and distribution of pharmaceutical drugs, medical devices and active pharmaceutical ingredients (API).

Global BioPharma, Inc. (GBP) formed with a group of seasoned managers with extensive experiences in research, clinical trials, CMC, manufacturing and business development with the financial support of VCs and individuals led by TBC.

GBP is formed solely to focus on the development and commercialization of ADXS-HPV for the treatment of human papillomavirus (HPV)-associated diseases. The GBP territory covers over 4 billion people with over 200,000 annual diagnoses of cervical cancer, accounting for roughly 40% of the world's cases, according to WHO statistics. GBP is dedicated to the development, manufacturing and commercialization of ADXS-HPV for the treatment of HPV-associated diseases.

GBP plans to conduct registration trials with ADXS-HPV for the treatment of advanced cervical cancer and will explore the use of Advaxis' lead product candidate in several other indications including lung, head and neck and anal cancer.

According to the agreement, GBP will pay Advaxis event-based financial milestones, an annual development fee, and annual net sales royalty payments in the high single to double digits. In addition, as an upfront payment, GBP will make an investment in Advaxis by purchasing from the company shares of its common stock at market price. GBP will also have an option to purchase additional shares of Advaxis stock from the company at a 150% premium to the stock price on the effective date of the agreement.

GBP will be responsible for all clinical development and commercialization costs in the GBP territory. In collaboration with Advaxis, GBP will also identify and pay the clinical trial costs for up to 150 patients with cervical cancer for enrollment in Advaxis' U.S. and GBP's Asia registrational programs for cervical cancer. GBP is committed to establishing manufacturing capabilities for its own territory and to serving as a secondary manufacturing source for Advaxis in the future. Under the terms of the agreement, Advaxis will exclusively license the rights to ADXS-HPV to GBP for the Asia, Africa and former USSR territory, exclusive of India and certain other countries, for all HPV-associated indications. Advaxis will retain exclusive rights to ADXS-HPV for the rest of the world.

Our Takeaways

We see the GBP deal as a positive to Advaxis. It means a lot to Advaxis.

The deal brings great tangible economics to Advaxis.

First, Advaxis will have the access to data from 150 patients with cervical cancer, which can be used for registrational programs in the US. Let's think about the cost of $20,000 per patient, it will save Advaxis $3 million for the clinical program. Three million dollars may not be a big number, but the data from the 150 patients will save time and other related resources.

Second, the deal secures a second manufacturing source for Advaxis. This is important because establishing a manufacturing facility for immunotherapy is both time consuming and costly. The GBP manufacturing source will complement Advaxis' US manufacturing capability.

Further, this deal not only boosts Advaxis' balance sheet in a non-dilutive way, but more importantly validates Advaxis' proprietary immunotherapy technology. It is impressive that a new company has been exclusively formed and funded by a team of seasoned biopharmaceutical professionals to develop and commercialize ADXS-HPV in Asia and other important markets.

Even further, the GBP deal will serve as an exemplar for other partnership talks. The GBP agreement is the first to be executed as part of Advaxis' global commercialization strategy to enter into regional licensing deals with other market dominant biopharmaceutical companies in territories where there is a high prevalence of HPV-associated cancers. When Advaxis continues to advance its clinical programs with positive data, it will attract big pharma or biotech companies to the negotiation table. The favorable terms with GBP will serve as an example for Advaxis to get similar deals in future partnership talks.

We Maintain Our Outperform Rating On ADXS Shares

We maintain our Outperform rating for ADXS and reiterate our 12-month price target of $7.50 per share.

Our call is based on strong fundamentals of Advaxis and recent developments within the company.

We are optimistic about Advaxis' live, attenuated Listeria technology, which is a unique immunotherapeutic platform that can target various cancer indications and infectious diseases. This technology has advantages over other immunotherapies and has generated positive clinical data.

The deal with GBP is especially encouraging in our view. The favorable terms in this deal not only strength Advaxis' balance sheet in a non-dilutive way, but also validate the company's technology. Furthermore, the deal will serve as an example for future talks which are supposed to generate similar favorable terms for Advaxis. With the GBP deal, the ADXS-HPV is one step closer to reach the market.

The company recently completed a $26.5 million financing, which boosted the balance sheet greatly.

ADXS-HPV has a huge market potential. Cervical cancer is a worldwide problem and ranks as the 2nd leading cause of cancer death of women in the world. According to WHO, about 630 million people are infected with one of the over 100 strains of HPV. Global prevalence of clinically pre-malignant HPV infections is between 28 to 40 million women. Approximately 500,000 women are diagnosed of cervical cancer each year and about 11.4% of women in the general population are estimated to harbor cervical HPV infection. In the US, about 12000 new cases of cervical cancer are diagnosed each year. Prevalence of cervical cancer is higher in developing countries and India, China and South America are the three regions with highest cervical cancer prevalence (50% of cervical cancer burden).

In addition to cervical cancer, ADXS-HPV has potential to target other HPV-mediated cancers, which further expand ADXS-HPV's market. The Company already initiated clinical studies of ADXS-HPV for head and neck cancer as well as anal cancer.

Our price target of $7.50 per share values the Company at $86 million in market cap, which is still conservative.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: I work as a Consultant Analyst for Zacks Investment Research. The article is written by me and is 100% my opinion. I receive compensation from Zacks for writing equity research reports and providing valuation analysis on this company’s stock and expect to do so in the future. Zacks receives compensation from the company. Please see the Zacks Disclaimer for further information: http://scr.zacks.com/Disclaimer/default.aspx