Tercica Soars 23.6% on Genentech Deal

Shares of Tercica Inc. shot up 23.6% to close at $6.70 in AH trading Tuesday on news the biotech company has inked a deal with Genentech to develop, manufacture and market two products. The new drugs will combine Genentech's Nutropin AQ, a recombinant human growth hormone [rhGH], and Tercica's Increlex, an insulin-like growth factor [rhIGF-1]. One product will be designed to treat short stature in children and the other to treat metabolic disorders associated with growth hormone deficiency in adults. Under the terms of the agreement, Genentech bought 708,591 shares of Tercica stock for $4 million. Tercica will be eligible for "up to $53 million in equity payments, opt-in payments, research and development cost reimbursement and milestone payments," according to a company press release. Tercica will finance and lead the product development; Genentech will have the right to become a full development partner up to the completion of Phase II clinical trials. If Genentech declines and Tercica brings the products to market alone, Genentech will receive royalties. Tercica is aiming to hold mid-stage trials by early next year. "With demonstrated synergies in pre-clinical studies, the combination of rhGH and rhIGF-1 could have the potential for several important therapeutic benefits compared to either rhGH or rhIGF-1 monotherapy alone for the treatment of patients with short stature and AGHD and potentially other adult metabolic disorders," said Tercica CEO John Scarlett.

Sources: Press release, MarketWatch, Forbes, Reuters, TheStreet.com
Commentary: Celgene, Genentech, Gilead: Is Biotech Weakness Creating A Buying Opportunity? • Biotech Week In Review: Flat Never Looked So Good • Growth Stocks See Multiples Compress; Investors, Make a Shopping List
Stocks/ETFs to watch: Tercica, Inc. (TRCA), Genentech, Inc. (DNA). Competitors: Eli Lilly & Co. (LLY), Pfizer Inc. (PFE). ETFs: HealthShares Metabolic-Endocrine (HHM)
Earnings call transcripts: Genentech Q1 2007

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